FOREVERGREEN WORLDWIDE CORP (Form: 10-Q, Received: 11/14/2016 15:29:53)

FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the period ended September 30, 2016 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2015 audited financial statements as reported in its Form 10-K. The results of operations for the nine month period ended September 30, 2016 are not necessarily indicative of the operating results for the full year ended December 31, 2016.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements are prepared on the basis of accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated balance sheets and statement of operations at September 30, 2016 include the books of ForeverGreen Worldwide Corporation (Nevada) and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation.

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.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. The carrying amounts reported for notes payable approximate fair value because the underlying instruments are at interest rates which approximate current market rates.

FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Reclassification

Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.

Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. As of September 30, 2016, there were 9,846,754 common stock equivalents from convertible notes that were excluded from the diluted EPS calculation as their effect is anti-dilutive.

Revenue Recognition

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 source of revenue is from the sale of various food and other natural products. 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. All conditions of ASC 605-10 are met and the revenue is recorded upon sale, with an estimated allowance for returns where material.

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 September 30, 2016 and December 31, 2015, the reserve for obsolete inventory had balances in the amount of $40,000 and $40,000, respectively.

Accounts Receivable and Member Advances

Normally the majority of accounts receivable are sales deposits processed by third parties from the prior one to four days that have not posted to the Company’s bank account.

Members are required to pay for products prior to shipment. Members typically pay for products in cash, by wire transfer or by credit card. Accordingly, the Company seldom carries accounts receivable from members that are not distribution centers and any balances carried would be minimal. In order to increase business, the Company occasionally makes advances to new Members to assist them with building their businesses.

FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Valuation of Long-lived Assets

In accordance with ASC 360-10, the carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. 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’s assessment of events and circumstances indicated that an analysis for impairment of long-lived assets as of September 30, 2016 was not needed.

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. Management assesses the carrying values of long-lived assets for impairment when circumstances warrant such a review. In performing this assessment, management considers current market analysis of the technology and future cash flows.

The Company recognizes impairment losses when undiscounted cash flows estimated to be generated from long-lived assets are less than the net carrying amount of intangible assets. No impairment was recognized, accordingly, during the periods ended September 30, 2016 and 2015.

New Accounting Pronouncements

After evaluating the recent accounting pronouncements through the date of this filing, the Company has concluded that application of these pronouncements will have no material impact on the Company’s financial results.

NOTE 3 – DEBT

Convertible notes payable and notes payable as of September 30, 2016


TYPE	CONVERSION RATE PER SHARE		ORIGINATION DATE	INTEREST RATE	DUE DATE	BALANCE
Convertible, Related party	0.68		12/01/2015	10%	12/31/2018	$ 1,501,024
Convertible, Related party	0.15		10/7/2010	10%	12/31/2017	$ 45,000
Convertible, Related party	0.20		1/19/2011	10%	12/31/2017	$ 200,000
Convertible, Non-related	0.20		3/9/2010	10%	12/31/2017	$ 231,756
Convertible, Non-related		0.20	3/14/2011	14%	12/31/2015	$ 100,000

FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 3 – DEBT - continued

Convertible notes payable and notes payable as of September 30, 2016 - continued


TYPE	CONVERSION RATE PER SHARE		ORIGINATION DATE	INTEREST RATE	DUE DATE	BALANCE
Convertible, Non-related		0.70	02/25/2015	14%	12/31/2015	$ 891,718
Convertible, Non-related		1.00	07/06/2015	12%	08/31/2015	$ 200,000
Convertible, Non-related		0.35	05/27/2016	10%	12/31/2018	$ 500,000
Convertible, Non-related		0.35	06/23/2016	10%	12/31/2018	$ 150,000
Convertible, Non-related		0.35	07/08/2016	10%	12/31/2018	$ 50,000
Non-related		NA	08/10/2016	NA	04/15/2018	$ 489,000
Debt Discount		NA	08/10/2016	NA	04/15/2018	$ (22,920)
Non-related		NA	03/01/2016	4.66%	03/01/2018	$ 405,115
Total						$ 4,740,693

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 September 30, 2016 the Company has paid $101,043 toward the note balance, leaving a balance of $405,115 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 September 30, 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.

FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

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.

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.

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 September 30, 2016 the Company has paid $36,000, leaving a balance of $489,000 due and interest expense of $2,080 was recorded as part of the amortization of the original issue discount. This agreement was terminated subsequent to period end, on October 21, 2016, and replaced by a new investment agreement (see Note 8).

NOTE 4 - COMMITMENTS AND CONTINGENCIES

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.

NOTE 5 – INVENTORY


		September 30, 2016		December 31, 2015
Raw Materials	$	1,307,660	$	1,055,243
Finished Goods		1,172,976		1,012,399
Total Inventory		2,480,636		2,067,642
Less Reserve for Obsolete Inventory		(40,000)		(40,000)
Total Inventory (net of reserve)	$	2,440,636	$	2,027,642

NOTE 6 – LITIGATION SETTLEMENT

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 February 25, 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.

FOREVERGREEN WORLDWIDE CORPORATION

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 7 – GOING CONCERN

As reported in the accompanying consolidated financial statements the Company has a working capital deficit of $2,950,578 and accumulated deficit of $37,803,749 at September 30, 2016, 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. Management’s plans to address and alleviate these concerns are as follows: The Company has reviewed its cost structure and is taking steps to implement cost saving measures deemed to be effective. This includes a reduction in labor force, restructuring of lease agreements, revised pricing of certain products to enhance sales incentives, and a marketing plan which involves more interaction with a broad scope of customers and Members.

Additionally, we expect we will take advantage of limited 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 is reviewing improvements to the marketing plan which will enhance the opportunities for continued growth. The Company intends to seek debt and equity financing as necessary.

Management anticipates that any future additional capital needed 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 then our shareholders may experience dilution in the value per share of their common stock.

NOTE 8 – SUBSEQUENT EVENTS

On October 18, 2016, as part of our expense restructuring initiative, the Company negotiated the exit from one 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).

On October 21, 2016 the Company terminated the investment agreement dated August 10, 2016 (see Note 3) and entered into a new investment agreement with the same third party for $1,025,000, including an original issue discount of $425,000. 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.

On October 19, 2016 the Company issued 1,000,000 shares of common stock for cash proceeds of $300,000 at $0.30 per common share.

In this report references to “ForeverGreen,” “the Company,” “we,” “us,” and “our” refer to ForeverGreen Worldwide Corp. and its subsidiaries.

NOTE REGARDING FORWARD LOOKING STATEMENTS

The U.S. Securities and Exchange Commission (“SEC”) encourages reporting 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.

ITEM 2. 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 customers and Members our newly announced global Xpress product, Prodigy-5 along with our exclusive Ketopia line, PowerStrips, SolarStrips, and BeautyStrips products. In addition, we will continue to evaluate and share our array of nutrition, supplement, and weight management products to our customers and Members. 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.

During the first nine months of 2016 the Company experienced exciting updates that included, changes and additions involving ForeverGreen’s executive team, new product announcements, and an exciting new face on the Scientific Advisory Board.

In July and August, ForeverGreen made adjustments and additions to their executive team. Chief Information Officer, Rob Ferguson, took on the additional role of guiding daily operations as Chief Operating Officer. Jorge Alvarado, Vice President of Latin America, added the role of Chief Marketing Officer to his responsibilities. Chief Sales Officer, Joe Jensen added Europe to his areas of Asia and North America. Joining Jensen as co-Chief Sales Officer was Rick Redford, a veteran team leader. Redford brings over 25 years of successful Direct Selling industry experience, previously working at Unicity International, Genesis Pure and Viz. His extensive experience includes contract manufacturing, sales, marketing and international expansion. Along with his experience in direct selling, Redford brings his expertise in running several businesses, international sales and public speaking.

August also saw the announcement of ForeverGreen’s continued commitment to overall cost reductions and a path to profitability. Management believes that with the amount of global marketing momentum the Company achieved by the end of 2015, the Company intends to shift our focus from top-line revenue growth to expense management and profitability.

September marked the official addition of Dr. Balamurali Ambati, Ph.D., M.D. to ForeverGreen’s scientific advisory board. In 1995, Ambati entered the Guinness Book of World Records as the world's youngest doctor, at the age of seventeen. He has won numerous awards including the Ludwig von Sallmann Clinician-Scientist Award from the ARVO Foundation in 2014 and the Troutman-Véronneau Prize from the Pan-American Association of Ophthalmology in 2013. Dr. Ambati joined the company as a developmental part of ForeverGreen's revolutionary and scientific, recently announced product, Prodigy-5, described below.

With the addition of Dr. Ambati, ForeverGreen also acquired the exclusive, proprietary technology, Nutrisorb. This key ingredient will be featured in the upcoming (anticipated late November) new global Xpress model product, Prodigy-5. Dr. Balamurali Ambati, who recently joined the ForeverGreen scientific advisory board, helped develop the technology along with Dr. Adam Saucedo, M.D. of ForeverGreen. Nutrisorb, is an ingredient used 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 Nutrisorb technology and gives the Company worldwide exclusivity. As part of the license agreement,

It was in mid-September that ForeverGreen officially announced the development of our new global product, Prodigy-5. In brief, the product Prodigy-5's worldwide, exclusive technology answers the phrase, “You're not just as healthy as what you ingest, but rather what you absorb”. This key technology aids the body in absorbing more of the nutrition than it normally would, thereby increasing efficiencies and overall health. Prodigy-5 will be the newest offering in ForeverGreen's global Xpress model and management believes this new product could reframe the current conversation on supplementation. ForeverGreen has scientifically combined several products into one and as a part of the global Xpress model the Company expects to bring this all-in-one nutritional habit to the public.

The Company continues to look for opportunities to improve upon or expand the restructuring and cost cutting initiatives implemented in the first, second and third quarters. Management has instigated cost cutting measures to reduce overhead and anticipates the November launch of Prodigy-5 will grow revenues. Pre-orders for the product already total more than $1.5M. The Company is also reviewing its entire line of products to determine which may be phased out or reworked to fit into their exciting global Xpress model. We continually manage our systems and logistics centers around the world to support the demand for our products and business opportunity. We continually challenge ourselves to continue to meet a high standard of quality and customer service and maintain the highest levels of Member satisfaction.

Overcoming periodic economic downturns and managing profitability will continue to require skilled personnel and responsive manufacturing and shipping facilities. Management intends to continue ongoing process improvement initiatives, especially in the areas of production and order fulfillment. These new operating efficiencies are targeted to address the current economic environment as well as prepare the Company for the upturn in demand as Prodigy-5 begins to ship and as people continue to look for alternative income opportunities. We are actively positioning ForeverGreen to be the Company they can align with for the future as traditional employment options.

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Results of Operations

The following chart summarizes the consolidated statements of operations of ForeverGreen Worldwide and subsidiaries for the three and nine month periods ending September 30, 2016 and 2015.

22.

ARTICLE XXII.

Late Charges

23.

ARTICLE XXIII.

Miscellaneous

ATTACHMENTS:

Site Plan EXHIBIT "A"

Building Plan EXHIBIT "B"

TI’s, Units location, FROR and Renewal Option EXHIBIT “C”

Guarantee EXHIBIT "D"

Rules and Regulations EXHIBIT "E"

Special Provisions EXHIBIT "F"

WI Commercial West LLC

OFFICE/WAREHOUSE LEASE

This Lease, entered into this 29 ^th day of September , 2015 by and between Landlord and the Tenant hereinafter named, relative to Lindon Tech Center 2000 W 500 N Lindon, UT 84042 Suite 101,102,103 and 104 ("Property").

ARTICLE I. Definitions and Certain Basic Provisions

1.1

(a)

"Landlord":

WI Commercial West Lindon LLC

(b)

“Landlord’s mailing address: 4914 Joanne Kearney Blvd, Tampa Fl 33619

(c)

"Tenant":

Forever Green

(d)

Tenant's mailing address:

As listed below

Please Provide

(e)

Tenant's trade name:

Forever Green

(f)

Tenant's proposed address will be 2000 W 500 N Lindon, UT 84042 Suite 101, 102, 103 and 104

(g)

"Demised Premises": In consideration of the rents to be paid by Tenant, and of the covenants, terms and conditions to be kept and performed as herein provided, Landlord does hereby lease unto Tenant and Tenant does hereby accept a lease on the following described premises: Approximately 32,648 square feet, computed from measurements to the exterior of outside walls of the building and to the midpoint of interior demising walls (the "Rentable Area"), such premises being shown and outlined on the plan attached hereto as Exhibit "A", and being part of the Project situated upon the property described in Exhibit "C" attached hereto. The above estimated Rentable Area of the demised Premises may be revised, at Landlord's election, if Landlord's architect determines such estimate to be inaccurate in any material degree. In the event of such revision of the Rentable Area of the Demised Premises, any amounts determined on the basis of the Rentable Area shall be adjusted proportionately, including without limitation, the Minimum Guaranteed Rental, Common Area Maintenance Charge, Insurance Payment, Tax Payment, and Security Deposit (all defined below).

This Lease shall include the nonexclusive right to use the parking areas, roadways, means of ingress and egress, sidewalks, restrooms, lobby areas and other areas, and surroundings of the project which are included for the common use and enjoyment of Tenant and third persons (the

"Common Areas"). And exclusive right to parking places directly in front and to the north of Tenant’s leased space.

(h)

"Lease Term": Commencing on the "Commencement Date"

December 1 ^st 2015 and ending 123 months thereafter. The lease payment shall always be due on the 1 ^st day of the month. The lease payment shall be accomplished by wire transfer to the account designated by the Landlord on or before the 1 ^st of the month.

(i)

"Minimum Guaranteed Rent" first year total: $309,794.88 ( for 12 months after free rent period ) payable in advance or by the 1 ^st of each month, by wire transfer, in monthly installments of $ 25,816.24 Dollars. Minimum Guaranteed Rent includes the minimum monthly rent plus the monthly estimated NNN fees. (See Exhibit F) At the first day of above described “Commencement Date”, the first three (3) free month’s rent, the Tenant shall tender the month’s NNN fees and the amortized amount of rent for the days the space was occupied before the 1 ^st day of that month.

(j)

Initial triple net charge budget per month estimated at $ 0. 13 cents per foot

4,244.24 Dollars per month .

(k)

Initial "triple net charge per year $ 50,930.88

Dollars

(L) Initial other charges

Dollars .

(m)

"Security Deposit": $ 0 Dollars .

(n)

"Prepaid Rental":

$49,373.74 Dollars due upon execution of this Lease, to be applied to the last month’s Rent under this Lease.

(o)

Tenant's percentage of its proportionate share of expenses attributable to all tenants of the property is initially estimated to be 20 % (calculated by dividing the total number of square feet in the Demised Premises by the total number of square feet of the property); provided, however, that if the total area of the property is reduced by reason of a destruction, sale, or condemnation of any individual buildings (as shown on the site plan - Exhibit "A") comprising the property then Tenant's proportionate share of such expenses shall be redetermined based on the relationship of the number of square feet in the Demised Premises to the total remaining number of square feet of the property.

1.2

Each of the foregoing definitions and basic provisions shall be construed in conjunction with and limited by references thereto in other provisions of this Lease.

ARTICLE II. Granting Clause, Improvements and Acceptance

2.1

In consideration of the obligation of Tenant to pay rent and other charges as herein provided and in consideration of the other terms, covenants, conditions and promises hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby leases from Landlord, the Demised Premises as described in Article I, Section 1.1(g), TO HAVE AND TO HOLD said premises for the Lease Term specified in Article I, Section 1.1(h), all upon the terms and conditions set forth in this Lease.

ARTICLE III. Monthly Payment

3.1

The total initial Monthly Payment to be made by Tenant to Landlord, subject to adjustment as provided herein, shall be the sum of: $25,816.24 DOLLARS This initial Monthly Payment shall mean the sum of the monthly installments of Minimum Guaranteed Rental as set forth in Article I., Section 1.1(i); Common Area Maintenance Charge as set forth in Article I, Section 1.1(j); Insurance Payment as set forth in Article I, Section 1.1(k); Tax Payment as set forth in Article I, Section 1.1(l) and such other payments as are required under the terms of this Lease for each respective month.

3.2

The Monthly Payment, as specified in Section 3.1 herein, and all other monetary obligations hereunder, shall accrue hereunder from the Commencement Date and shall be payable at the place designated for the delivery of notices to Landlord at the time of payment, without demand and without setoff or deduction, for any reason whatsoever, except as herein provided, and subsequent payments shall be due and payable on or before the first day of each succeeding calendar month during the Lease Term; provided that if the Commencement Date is a date other than the first day of a calendar month, there shall be due and payable on or before such date as monthly payment for the balance of such calendar month, a sum equal to that proportion of the rent specified for the first full calendar month, as herein provided, which the number of days from the Commencement Date to the end of the calendar month during which the Commencement Date shall fall bears to the total number of days in such month.

(a)

Tenant shall pay the monthly installments of the Minimum Guaranteed Rent as same come due through the end of the first Lease Year, and thereafter the Minimum Guaranteed Rent shall be increased annually, beginning the second Lease year, at the commencement of each successive Lease year, including any term of renewal, by 3% . The Minimum Guaranteed Rent as increased shall then be payable during the ensuing Lease Year in the same manner as otherwise provided in this Paragraph.

ARTICLE IV. Common Area

4.1

The "Common Area" is that part of the property designated by Landlord from time to time for the common use of all tenants, including among other facilities, the parking areas, sidewalks, landscaping, curbs, loading areas, private streets, and alleys, lighting facilities, hallways, canopies, restrooms, and other areas and improvements provided by Landlord for the

common use of all tenants of the property, all of which shall be subject to Landlord's sole management and control and shall be operated and maintained in such manner as Landlord, in its sole discretion, shall determine. Landlord reserves the right to change from time to time the dimensions and location of the Common Area as shown on Exhibit "A" as well as the location, dimensions, identity and type of building shown on Exhibit "A" and to construct additional buildings or additional stories on existing buildings or other improvements in the property, and to eliminate buildings from the plan shown on Exhibit "A". Landlord reserves the right to effect changes to the configuration, type or number of parking spaces as may be deemed necessary in Landlord's sole judgment. Tenant and its employees, customers, subtenants, licensees, and concessionaires shall have the nonexclusive right and license to use the Common Area as constituted from time to time, such use to be in common with Landlord, other tenants of the property and other persons permitted by Landlord to use the same, and subject to such reasonable rules and regulations governing use as Landlord may from time to time prescribe and as defined hereinafter, including the designation of specific areas within the property or in reasonable proximity thereto in which automobiles owned by Tenant, its employees, subtenants, licensees or concessionaires may park. Tenant shall not solicit business or distribute handbills within the Common Area, shall be parked, or take any action which would interfere with the right of other persons to use the Common Area without prior written consent of the Landlord. Landlord may temporarily close any part of the Common Area for such periods of time as may be necessary to prevent the public from obtaining prescriptive rights or to make repairs or alterations.

4.2

Tenant agrees to pay as additional rent each month during the term of this Lease, as part of its "monthly payment", 20% its proportionate share of the Common Area Maintenance Charge as estimated in Article I, Section 1.1(j), and more fully described herein. Each such monthly Common Area Maintenance Payment shall be due and payable at the same time and in the same manner as the payment of Minimum Guaranteed Rental. The Common Area Maintenance Charge shall include the cost of managing, operating and maintaining the Common Area (including, among other costs, a management fee at 3% of net lease, those costs incurred for lighting, heating, air conditioning, water, sewerage, painting, cleaning, policing, insuring, inspecting, paving, signage and interior common areas (if any) including restrooms, corridors and elevators, and of all exterior gutters and downspouts, exterior building appliances and common electrical, landscaping, exterior irrigation, repairing, replacing, guarding and protecting) which may be incurred by Landlord in its sole discretion. The proportionate share to be paid by Tenant of the cost of operation and maintenance of the Common Area (the "Common Area Maintenance Charge") shall be computed on the ratio that the total area of the Demised Premises bears to the gross leasable area of the property, as such gross leasable area may be determined from time to time in Landlord's sole discretion. Landlord shall make monthly or other periodic charges based upon the estimated annual costs as herein defined, payable in advance subject to adjustment after the end of the year on the basis of the actual cost for such year. Any such periodic charges shall be due and payable upon delivery of notice thereof. The initial Common Area Maintenance Charge subject to adjustment as provided herein, shall be that amount set out in Article I, Section 1.1(j) and may be amended as above and subject to adjustments set out in Section 4.3.

4.3

Tenant authorizes Landlord to use the funds deposited by Tenant with Landlord under this Article to pay the Common Area Maintenance. The initial Common Area Maintenance Payment is based upon Tenant's proportionate share of the estimated amount of Common Area Maintenance costs for the year of the execution of this Lease, and such monthly Common Area Maintenance Payment is subject to increase or decrease as determined by Landlord to reflect an accurate monthly payment of Tenant's estimated proportionate share of the Common Area Maintenance charges. Tenant's Common Area Maintenance Payments shall be reconciled annually. If Tenant's total annual Common Area Maintenance Payments are less than Tenant's actual pro rata share of the Common Area Maintenance Payments, Tenant shall pay to Landlord upon demand the difference. If the total annual Common Area Maintenance charges are more than Tenant's actual pro rata share of the Common Area Maintenance charges, Landlord shall retain such excess and credit it to future Common Area Maintenance Payments due from Tenant. Tenant's proportionate share of the Common Area Maintenance Payments shall be computed by multiplying the Common Area Maintenance charges by a fraction, the numerator of which shall be the number of square feet of floor area in the Demised Premises and the denominator of which shall be the number of gross leasable square feet of the property, as may be determined from time to time by the Landlord.

ARTICLE V. Use and Care of Premises

5.1

Tenant shall use the Demised Premises for general office and warehouse purposes only. Tenant shall at its sole cost and expense obtain any and all licenses and permits required for the transaction of business in the Demised Premises and otherwise comply with all applicable laws, ordinances and government regulations. Tenant shall not, without Landlord's permission, use or do, or allow anything to be used or done upon the Demised Premises which will increase or invalidate any policy of insurance now or hereafter carried on the building or on any of the contents thereof, or which may be dangerous, explosive or that may be damaging to life and limb or which will cause an increase in the rate of fire insurance on the building. If Landlord grants said permission it shall be solely on the condition that Tenant shall pay as additional rent, on demand, any increase in insurance premiums on the building or on the contents thereof due to Tenant's use or occupation of the Demised Premises. Tenant shall not in any manner deface or injure the building or any part thereof, or overload the floors of the Demised Premises.

The Demised Premises may be used only for the purpose or purposes specified above, and for no other purpose or purposes without the prior written consent of Landlord. Tenant shall conduct and carry on in the entire Demised Premises the type of business and purpose for which the Demised Premises are leased. Notwithstanding the above, no such prohibition shall relieve Tenant of any liability for any of its other obligations under this Lease.

5.2

All property kept, stored or maintained within the Demised Premises by Tenant shall be at Tenant's sole risk. Tenant waives liability of Landlord for loss of property in premises and common areas.

5.3

Tenant shall not permit any objectionable or unpleasant odors, noises or sights to emanate or be visible from the Demised Premises, nor place or permit any radio, television, loudspeaker or amplifier on the roof or outside the Demised Premises or where the same can be seen or heard from outside the building or in the Common Area, nor take any other action which in the exclusive judgment of Landlord would constitute a nuisance or would disturb or endanger other tenants of the property or unreasonably interfere with their use of their respective premises; nor place an antenna, awning, aerial or other projection on the exterior of the Demised Premises. Any such device installed without Landlord's prior written consent shall be subject to removal without notice and Landlord shall not be held liable for any loss or damage resulting from such removal. Tenant shall not solicit business or distribute leaflets or other advertising material in the Common Area; nor do anything which would diminish or tend to injure the reputation of the property.

5.4

Tenant shall take good care of the Demised Premises and keep the same free from waste at all times. Tenant shall keep the Demised Premises, service-ways and loading areas adjacent to the Demised Premises neat, clean and free from dirt, rubbish, insects and pests at all time, and shall store all trash and garbage within the Demised Premises, arranging for a regular pickup of such trash and garbage at Tenant’s expense. Tenant shall not operate an incinerator or burn trash or garbage within the property.

5.5

Tenant hereby agrees to abide by all of the rules and regulations as set forth by the Landlord attached hereto as Exhibit "E" and as may be from time to time modified in the sole discretion of the Landlord for the safety, care and cleanliness of the premises and the preservation of the premises. The rules and regulations attached hereto as Exhibit "E" are hereby expressly made a part of the attached Lease and Tenant agrees to obey all of the rules and regulations herein contained or as may be modified, added to or amended and published from time to time during the term of the Lease.

ARTICLE VI. Maintenance and Repair of Premises

6.1

Landlord shall, at its expense, keep the foundation, the exterior walls (except plate glass windows, doors, door closure devices, window and door frames, molding, locks and hardware and painting or other treatment of same) and roof of the Demised Premises in good repair, except that Landlord shall not be required to make any repairs, occasioned by the willful act or negligence of Tenant, its agents, employees, subtenants, licensees and concessionaires, which repairs shall be timely made by Tenant at its sole expense. In the event that the Demised Premises should become in need of repairs required to be made by Landlord hereunder, Tenant shall give immediate written notice thereof to Landlord and Landlord shall not be responsible in any way for failure to make any such repairs until a reasonable time shall have elapsed after delivery of such written notice. Landlord's obligations hereunder is limited to repairs specified in this Article VI, Section 6.1 only, and Landlord shall have no liability for any damages or injury arising out of any condition or occurrence causing a need for such repairs.

6.2

Tenant shall keep and maintain the Demised Premises in good order, condition and repair, and except as provided in Paragraph 6.1 above and shall diligently provide all maintenance and promptly make all repairs or replacements becoming necessary during the term of this Lease including, but without limitation, maintenance, repairs or replacements of windows, doors, glass or plate glass (which shall be replaced with glass or plate glass of the same size and quality), light bulbs and tubes, electrical, fire sprinkler, plumbing and sewage lines and fixtures within the Demised Premises, and all heating, air conditioning and ventilating equipment and ducts and vents attached thereto, including any of such equipment which may, with Landlord's consent, be mounted on the roof of the building, all interior walls and finish work, floors and floor coverings, ceilings, interior downspouts, all dock lifts, dock conveyors, dock bumpers, truck doors, fire extinguishers and building appliances of every kind. Nothing herein is intended to relieve Tenant from and Tenant agrees to be responsible for the maintenance and repair or replacement of the heating, ventilating and air conditioning system. Tenant shall keep the Demised Premises, sidewalks and loading areas adjacent thereto clean and free of all dirt and refuse. Tenant shall provide at its own expense custodial service, insect and pest control service performed at intervals determined by Landlord, rubbish removal and all other services and supplies necessary to maintain the Demised Premises.

6.3

If any repairs required to be made by Tenant hereunder are not made within ten days after written notice delivered to Tenant by Landlord, Landlord may, at its option, make such repairs without liability to Tenant for any loss or damage which may result at its business by reason of such repairs, and Tenant shall pay to Landlord immediately upon demand as additional rental hereunder the cost of such repairs plus ten percent (10%) of the amount thereof and failure to do so shall constitute an event of default hereunder. At the expiration of this Lease, Tenant shall surrender the Demised Premises in good condition, reasonable wear and tear and loss by fire or other casualty excepted and shall surrender all keys for the Demised Premises to Landlord.

6.4

Landlord shall have the option, at its sole discretion, of performing the regular monthly maintenance on the heating, ventilation and air conditioning (“HVAC”) unit(s) serving the Demised Premises throughout the term of this Lease. Should Landlord elect to exercise the foregoing option, the Tenant’s proportional share of the costs therefore shall be added to the Common Area Maintenance Charge as set forth in Section 4.2 of this Lease. In the event emergency or extraordinary repairs to the HVAC system of the Demised Premises are required, the total cost of such repairs shall be charged to the Tenant as additional rent.

6.5

In the event the Landlord does not exercise its election as set forth in Section 6.4 above, Tenant, at its sole cost and expense, shall maintain the heating, ventilation, and air conditioning ("HVAC") unit(s) serving the Demised Premises in good condition and repair throughout the term of this Lease. As a part of its HVAC maintenance obligation, Tenant shall enter into an annual contract with an HVAC maintenance firm, fully licensed to repair and maintain HVAC equipment in Utah County, Utah, which contract shall provide that said firm shall:

(a)

regularly service the HVAC unit(s) serving the Demised Premises on a monthly basis, changing belts, filters and other parts as required;

(b)

perform emergency and extraordinary repairs on the HVAC unit(s); and

(c)

keep a detailed record of all services performed on the HVAC equipment serving the Demised Premises and prepare a yearly service report to be furnished to Tenant at the end of each calendar year.

Tenant shall furnish to Landlord at the end of each calendar year during the Lease Term, a copy of said yearly service report. Not later than ten (10) days prior to the Commencement Date and annually thereafter, Tenant shall furnish to Landlord a copy of the HVAC maintenance contract described above, and proof that the annual charge for said maintenance contract has been paid.

6.6

Landlord’s Interference with Tenant. In performing any repairs, replacements, alterations, or other work performed on or around the Premises, Landlord shall not cause unreasonable interference with the use of the Premises by Tenant. Tenant has no right to an abatement of Rent nor any claim against Landlord for any inconvenience or disturbance resulting from Landlord’s activities performed in conformance with the requirement of this Section.

ARTICLE VII. Alterations

7.1

Tenant shall not make any alterations, additions or improvements to the Demised Premises without the prior written consent of Landlord, except for the installation of unattached, movable trade fixtures which may be installed without drilling, cutting or otherwise defacing or damaging the Demised Premises. All alterations, additions, improvements and fixtures (other than unattached, movable trade fixtures), which may be made or installed by either party upon the Demised Premises shall remain upon and be surrendered with the Demised Premises and become the property of Landlord at the termination of this Lease, unless Landlord requests their removal, in which event Tenant shall remove the same and restore the Demised Premises to their original condition at Tenant's expense. Any linoleum, carpeting or other floor covering which may be cemented or otherwise affixed to the floor of the Demised Premises is a permanent fixture and shall become the property of Landlord without credit or compensation to Tenant. Landlord reserves the right to review and approve any and all proposed plans and specifications with respect to any alterations, additions or improvements to the Demised Premises.

7.2

All construction work, including, without limitation, all alterations, additions and improvements, done by Tenant within the Demised Premises shall be performed in a good and workmanlike manner, in compliance with all governmental requirements, as amended from time to time, and the requirements of any mortgage, deed of trust, security deed, ground lease, or other agreement to which the Landlord may be a party and in such manner as to cause a minimum of interference with other construction in progress and with the transaction of business in the

property. Tenant shall immediately repair, at Tenant's expense, any and all portions of the property affected by such work. Tenant agrees to indemnify Landlord and hold it harmless against any loss, liability or damage resulting from such work, and Tenant shall, if requested by Landlord, furnish bond or other security satisfactory to Landlord against any such loss, liability or damage.

7.3

Tenant agrees that all venting, opening, sealing, waterproofing or any altering of the roof shall be performed at Tenant's expense by a licensed roofing contractor approved in advance by Landlord in writing, and that when completed, Tenant shall furnish to Landlord a certificate from such roofing contractor that all those alterations have been completed in accordance with the plans and specifications therefore as approved by Landlord.

7.4

Tenant agrees that in the event any wiring may be required for telephone, appliances, office equipment or other purposes, the installation thereof shall be under the sole direction of Landlord; and without Landlord's consent and direction, no installation, boring or cutting for wires shall be permitted.

7.5

Landlord and Tenant expressly agree and acknowledge that no interest of Landlord in the Demised Premises or property shall be subject to any lien for improvements made by Tenant in or for the Demised Premises, and the Landlord shall not be liable for any lien for any improvements made by Tenant, such liability being expressly prohibited by the terms of this Lease. In accordance with applicable laws of the State of Utah, Landlord has filed in the public records of Utah County, Utah, a public notice containing a true and correct copy of this paragraph, and Tenant hereby agrees to inform all contractors and materialmen performing work in for or supplying materials to the Demised Premises of the existence of said notice. In the event any such lien is claimed against the Demised Premises or any portion of the property, then Tenant shall discharge same or transfer such lien to other security within twenty (20) days of written notice or otherwise remove any liens, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge the same. Any amount paid by Landlord for any of the aforesaid purposes shall be reimbursed by Tenant to Landlord within ten (10) days of Landlord's demand therefore.

ARTICLE VIII. Landlord's Rights; Use of Roof

8.1

Landlord shall have the right to enter upon the Demised Premises at any reasonable time for the purpose of inspecting the same, or to perform repairs to the Demised Premises, or perform repairs, alterations or additions to adjacent premises, or for showing the Demised Premises to prospective purchasers, lessees or lenders.

Further, Landlord shall have the right to enter upon the Demised Premises at any time in the event of an emergency without liability for any damage caused to the Demised Premises or Tenant's property upon such entry.

8.2

Use of the roof above the Demised Premises is reserved to Landlord.

8.3

In addition to other rights conferred by this agreement or by law, Landlord reserves the right to be exercised in Landlord's sole discretion to change the name of the project or the building; install and maintain a sign or signs on the exterior or interior of the building; change the street address of the building; designate all sources furnishing signs, sign painting and lettering; take all measures as may be necessary or desirable for the safety and protection of the Demised Premises, the building or the project; have pass keys to the building; repair, alter, add to, improve, build additional stories on or build adjacent to the building; close any skylights or windows; run necessary pipes, conduits and ducts through the Demised Premises; renovate, refurbish, relocate or modify the common areas; and carry on any work, repairs, alterations or improvements in, on or about the building or in the vicinity thereof. Tenant hereby waives any claim to damages or inconvenience caused by Landlord's exercise of any such rights. This paragraph shall not be construed to alter or create any obligations of Landlord or Tenant with respect to repairs or improvements or other obligations provided herein.

ARTICLE IX. Signs

9.1

Tenant identification shall be provided by Landlord in conformance to the signage standards for the building and local codes. No additional signage shall be installed by Tenant.

9.2 Tenant shall not, without Landlord's prior written consent; (a) make any changes to or paint the exterior of the Demised Premises; or (b) install any exterior lighting, decorations or paintings; or (c) erect or install any signs, window or door lettering, placards, decorations or advertising media of any type which can be viewed from the exterior of the Demised Premises. All signs shall conform in all respects to the sign criteria established by Landlord for the property from time to time in the exercise of its sole discretion and shall be subject to the prior written approval of Landlord as to construction, method of attachment, size, shape, height, lighting, color and general appearance. All signs shall be kept in good condition and in proper operating order at all times.

ARTICLE X. Utilities

10.1

Landlord agrees to cause to be provided and maintained the necessary mains, conduits and other facilities necessary to supply water, electricity, telephone service and sewerage service to the building in which the Demised Premises is located.

10.2

Tenant shall promptly pay all charges for electricity, water, gas, telephone service, sewerage service and other utilities furnished to the Demised Premises and shall promptly pay any maintenance charges therefor. Landlord may, if it so elects, furnish one or more utility services to Tenant, and in such event Tenant shall purchase the use of such services as are tendered by Landlord and shall pay on demand as additional rental the rates established therefore by Landlord, which rates shall not exceed the rates which would be charged for the same services if furnished directly by the local public utility companies. Landlord may at any time discontinue furnishing any such service without obligation to Tenant other than to connect the Demised Premises to the public utility, if any, furnishing such service.

10.3

Landlord shall not be liable for any interruption or failure whatsoever in utility services to the Demised Premises from whatever cause.

ARTICLE XI. Indemnify; Public Liability Insurance

and Fire and Extended Coverage Insurance

11.1

Landlord shall not be liable to Tenant or Tenant's employees, agents or visitors, or to any other person or entity whomsoever for any injury to person or damage to or loss of property on or about the Demised Premises or the Common Area caused by the negligence or misconduct of Tenant, its employees, subtenants, licensees or concessionaires, or any other person entering the property under the express or implied invitation of Tenant, or arising out of the use of the Demised Premises by Tenant and the conduct of its business therein, or arising out of any breach or default by Tenant in the performance of its obligations hereunder or resulting from any other cause except Landlord's negligence, and Tenant hereby agrees to indemnify Landlord and hold it harmless from any loss, expense or claims arising out of such damage or injury.

11.2

Tenant shall procure and maintain throughout the term of this Lease a policy or policies of insurance, at its sole cost and expense, insuring Tenant and both Landlord and Landlord's managing agent for the property against all claims, demands or actions arising out of or in connection with Tenant's use or occupancy of the Demised Premises and the Common Areas of the property, or by the condition of the Demised Premises, or the action of third parties upon the Demised Premises or Common Areas, the limits of such policy or policies to be in an amount not less than $1,000,000 in respect of injuries to or death of any one person, and in an amount not less than $1,000,000 in respect to any one accident or disaster, and in an amount not less than $100,000 in respect of property damaged or destroyed. Tenant shall also procure and maintain throughout the term of this Lease a policy or policies of insurance, at its sole cost and expense, insuring against products liability, business interruptions, vandalism and malicious mischief. All such insurance shall be written by insurance companies authorized to issue such insurance coverage in the State of Utah. Tenant's insurer and the contents of Tenant's insurance policy or policies shall in each instance be subject to Landlord's reasonable approval. Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least ten (10) days prior to cancellation of such insurance. Duplicate original copies of such policies or duly executed certificates of insurance shall be promptly delivered to Landlord and renewals thereof as required shall be delivered to Landlord at least thirty (30) days prior to the expiration of the respective policy terms. Tenant's failure to comply with the foregoing requirements relating to insurance shall constitute an event of default hereunder. In addition the remedies provided in Article XVII of this Lease, Landlord may, but is not obligated to, obtain such insurance, and Tenant shall pay to Landlord upon demand as additional rental the premium cost thereof plus interest at the rate of twelve percent (12%) per annum from the date of payment by Landlord until repaid by Tenant.

11.3

Landlord and Tenant agree and covenant that neither shall be liable to the other for loss arising out of damage to or destruction of the Demised Premises or contents thereof when such loss is caused by any perils including within standard fire and extended coverage insurance

policy of the state of which the Demised Premises is situated, provided payment is made on the insurance claim for such loss. This waiver of liability to the extent of insurance coverage shall be binding whether or not such damage or destruction be caused by negligence of either party or their agents, employees or visitors.

11.4

Tenant agrees to pay, as additional rent during the term of this Lease, its proportionate share of Landlord's costs of carrying special risk or its equivalent insurance, liability insurance, or any other insurance covering the property or any portion thereof (collectively, the "Insurance"). During each month during the term of this Lease, Tenant shall make to Landlord, a monthly payment (the "Insurance Payment") equal to one-third (1/6th)(17%) of Tenant's proportionate share of the cost of the Insurance which will be due and payable for that particular year. Tenant authorizes Landlord to use the funds deposited by Tenant with Landlord under this Article XI, Section 11.4 to pay for the cost of such insurance. Each such Insurance Payment shall be due and payable at the same time and in the same manner as the payment of Minimum Guaranteed Rental as provided herein. The amount of the initial monthly Insurance Payment will be that amount set out in Article I, Section 1.1(k) above. The initial monthly Insurance Payment is based upon Tenant's proportionate share of the estimated cost of Insurance for the year of the execution of this Lease, and such monthly Insurance Payment is subject to increase or decrease as determined by Landlord to reflect an accurate monthly payment of Tenant's estimated proportionate share of the cost of Tenant's Insurance. Tenant's Insurance Payment shall be reconciled annually. If Tenant's total annual Insurance Payments are less than Tenant's actual pro rata share of the Insurance costs, Tenant shall pay to Landlord upon demand the difference. If the total annual Insurance Payments are more than Tenant's actual pro rata share of the Insurance costs, Landlord shall retain such excess and credit it to future Insurance Payments due from Tenant. Tenant's proportionate share of the cost of Insurance shall be computed by multiplying the cost of Insurance by a fraction, the numerator of which shall be the number of square feet of floor space in the Demised Premises and the denominator of which shall be the number of gross leasable square feet in the property.

ARTICLE XII. Non-Liability for Certain Damages

12.1

Landlord and Landlord's agents and employees shall not be liable to Tenant or any other person or entity whomsoever for any injury to person or damage to property caused by the Demised Premises or other portions of the property becoming out of repair or by defect in or failure of equipment, pipes or wiring, or broken glass or by the backing up of drains, or by gas, water, steam, electricity or oil leaking, escaping or flowing into the Demised Premises, nor shall Landlord be liable to Tenant or any other person or entity whomsoever for any loss or damage that may be occasioned by or through the acts or omissions of other tenants of the property or of any other persons or entities whomsoever, excepting only duly authorized employees and agents of Landlord. Tenant shall indemnify and hold Landlord harmless from any loss, cost, expense or claims arising out of such injury or damage referred to in this Article XII, Section 12.1.

ARTICLE XIII. Damages by Casualty

13.1

Tenant shall give immediate written notice to Landlord of any damage caused to the Demised Premises by fire or other casualty.

13.2

(a) In the event that the Demised Premises shall be damaged or destroyed by fire or other casualty insurable under the standard fire and extended coverage insurance, and Landlord does not elect to terminate this Lease as hereinafter provided Landlord shall proceed with reasonable diligence and at its sole cost and expense to rebuild and repair the Demised Premises, subject to the provisions of Section 13.3 of this Article. If the building in which the Demised Premises are located shall (i) be destroyed or substantially damaged by a casualty not covered by Landlord's insurance; or (ii) be destroyed or rendered untenantable to an extent in excess of fifty percent (50%) of the first floor area by a casualty covered by Landlord's insurance; or (iii) be damaged to such extent that the remaining term of this Lease is not sufficient to amortize the cost of reconstruction, then Landlord may elect either to terminate this Lease as hereinafter provided or to proceed to rebuild and repair the Demised Premises, subject to the provisions of Section 13.3 of this Article. Should Landlord elect to terminate this Lease, Landlord shall give written notice of such election to Tenant within ninety (90) days after the occurrence of such casualty. If Landlord should not elect to terminate this Lease, Landlord shall proceed with reasonable diligence and at its sole cost and expense to rebuild and repair the Demised Premises, subject to Section 13.3 of this Lease.

(b) If any portion of the Premises shall be rendered untenable, in Tenant’s reasonable judgment, for the use and occupancy thereof by Tenant for the conduct of its business operations as a result of any damage or destruction, or if Tenant reasonably shall anticipate that the repair and restoration of any such damage or destruction shall not be completed within ninety (90) days after the date of the damage or destruction and Landlord shall not have provided Tenant with temporary substitute premises acceptable to Tenant, in Tenant’s reasonable judgment, then Tenant may elect to terminate this Lease by delivery of notice to Landlord within thirty (30) days after the date of such damage or destruction.

13.3

Landlord's obligation to rebuild and repair under this Article XIII shall in any event be limited to restoring the Demised Premises to substantially the condition in which the same existed prior to the casualty, and shall be further limited to the extent of the insurance proceeds available to Landlord for such restoration.

13.4

Except as otherwise provided in section 13.1(b) Tenant agrees that during any period of reconstruction or repair of the Demised Premises it will continue the operation of its business within the Demised Premises to the extent practicable. During the period from the occurrence of the casualty until Landlord's repairs are completed, the Minimum Guaranteed Rental shall be reduced to such extent as may be fair and reasonable under the circumstances.

ARTICLE XIV. Eminent Domain

14.1

In the event more than twenty percent (20%) of the floor area of the Demised Premises should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, this Lease shall terminate and the rent shall be abated during the unexpired portion of this Lease, effective on the date physical possession is taken by the condemning authority.

14.2

In the event less than twenty percent (20%) of the floor area of the Demised Premises should be taken as aforesaid, this Lease shall not terminate; however, the Minimum Guaranteed Rental payable hereunder during the unexpired portion of this Lease shall be reduced in proportion to the area taken, effective on the date physical possession is taken by the condemning authority. Following such partial taking, Landlord shall make all necessary repairs or alterations necessary to make the Demised Premises an architectural whole.

14.3

If any part of the Common Area shall be taken as aforesaid, this Lease shall not terminate, nor shall the rental payable hereunder be reduced, except that either Landlord or Tenant may terminate this Lease if the area of the Common Area remaining following such taking plus any additional parking area provided by Landlord in reasonable proximity to the property shall be less than seventy percent (70%) of the area of the Common Area immediately prior to the taking. Any election to terminate this Lease in accordance with this provision shall be evidenced by written notice of termination delivered to the other party within thirty (30) days after the date physical possession is taken by the condemning authority.

14.4

All compensation awarded for any taking (or the proceeds of private sale in lieu thereof) of the Demised Premises or Common Area shall be the property of Landlord, and Tenant hereby assigns its interest in any such award to Landlord; provided, however, Landlord shall have no interest in any award made to Tenant for loss of business or for the taking of Tenant's fixtures and other property if a separate award for such items is made to Tenant.

ARTICLE XV. Assignment and Subletting

15.1

Tenant shall not assign or in any manner transfer this Lease or any estate or interest therein, or sublet the Demised Premises or any part thereof, or grant any license, concession or other right to occupy any portion of the Demised Premises without the prior written consent of Landlord. Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord's rights as to any subsequent assignments and sublettings. Notwithstanding any assignment or subletting, Tenant and any guarantor of Tenant's obligations under this Lease shall at all times remain fully responsible and liable for the payment of the rental herein specified and for compliance with all of Tenant's other obligations under this Lease.

15.2

In the event of the transfer and assignment by Landlord of this interest in this Lease, the building containing the Demised Premises, or the property to a person expressly assuming Landlord's obligations under this Lease, Landlord shall thereby be released from any

further obligations thereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Any Security Deposit or other security given by Tenant to secure performance of Tenant's obligations hereunder may be assigned and transferred by Landlord to such successor in interest, and Landlord shall thereby be discharged of any further obligation relating thereto.

15.3

Tenant shall not mortgage, pledge or otherwise encumber its interest in this Lease or in the Demised Premises.

15.4

Landlord's consent to assignment and subletting which is required under Article XV, Section 15.1 of this Lease shall not be unreasonably withheld by Landlord if (i) such transfer does not result in a material or substantial reduction in the quality and type of business operation which Tenant has conducted theretofore within the Demised Premises, (ii) the business to be conducted by such successor shall in all respects be in accordance with the provisions of this Lease including, without limitation, the requirements relating to Tenant's permitted use of the Demised Premises, and (iii) such successor shall have a net worth which is substantially similar to that of Tenant. Tenant agrees to promptly provide Landlord with such information regarding such proposed assignee or subtenant and regarding any proposed alterations of the Demised Premises which will be required in connection with such assignment or subletting. In no event shall any sublease or assignment be made or allowed which would in any way violate any then exclusive use provisions granted to or any other tenants or occupants of the property. Any assignment or sublease shall comply with all applicable laws. In the event that Landlord consents to any such assignment or subletting, such successor shall assume in writing, in a form reasonably satisfactory to Landlord, all of Tenant's obligations hereunder.

15.5

Any subtenant or assignee of Tenant shall be required to pay all sums due from such subtenant or assignee directly to Landlord. In addition, Landlord reserves the right to retain any excess rental or other consideration paid by any assignee or sublessee of Tenant over the Minimum Guaranteed Rental required from Tenant under the terms of this Lease. Any acceptance of rent by Landlord from an unauthorized assignee or sublessee of Tenant, or Landlord permitting such unauthorized assignee or sublessee to remain in possession of the Demised Premises for any length of time, shall not be deemed consent by Landlord to any such assignment or sublessee or waiver of any breach of the provisions of this Lease by Tenant.

15.6

The sale, issuance or transfer of a majority of the voting capital stock of Tenant (if Tenant be a non-public corporation) shall be deemed to be an assignment of this Lease within the meaning of this Article.

ARTICLE XVI. Property Taxes

16.1

Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in or about the Demised Premises. If any such taxes are levied against Landlord or Landlord's property and if Landlord elects to pay the same, or if the assessed value of Landlord's property is increased by inclusion of personal property and trade fixtures placed by

Tenant in or about the Demised Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder.

16.2

Tenant agrees to pay:

(a)

As additional rent during the term of this Lease, its proportionate share of "Taxes" (as hereinafter defined). For purposes hereof, the term "Taxes" shall include all real estate taxes, assessments for public improvements, water and sewer charges (except for such water and sewer charges which are measured by the consumption of the actual user of the item or service for which such charge is made) and all other governmental levies, surcharges and charges of every kind and nature whatsoever, general and special, extraordinary as well as ordinary, foreseen and unforeseen, and each and every installment thereof, which shall during the term of this Lease be levied, assessed or imposed upon the land, buildings or other improvements composing the property or any portion thereof, including interest on such installment payments and all reasonable costs, expenses and attorneys', accountants', consultants', and appraisers' fees incurred by Landlord in contesting such taxes or in negotiating with the taxing authorities with respect to the same. During each month of the term of this Lease, Tenant shall pay to Landlord a monthly payment (the "Tax Payment") equal to one-third (1/6th) (17%) of Tenant's proportionate share of the Taxes which will be due and payable for that particular year. Tenant authorizes Landlord to use the funds deposited by Tenant with Landlord under this Article XVI, Section 16.2(a) to pay the Taxes. Each such monthly Tax Payment shall be due and payable at the same time and manner as the payment of Minimum Guaranteed Rental as shall be that amount set out in Article I, Section 1.1(l) above. The initial Tax Payment is based upon Tenant's proportionate share of the estimated amount of Taxes for the year of the execution of this Lease, and such monthly Tax Payment is subject to increase or decrease as determined by Landlord to reflect an accurate monthly payment of Tenant's estimated proportionate share of the Taxes. Tenant's Tax Payment shall be reconciled annually. If Tenant's total annual Tax Payments are less than Tenant's actual pro rata share of the Taxes, Tenant shall pay to Landlord upon demand the difference. If the total annual Tax Payments are more than Tenant's actual pro rata share of the Taxes, Landlord shall retain such excess and credit it to future Tax Payments due from Tenant. Tenant's proportionate share of the taxes shall be computed by multiplying the Taxes by a fraction, the numerator of which shall be the number of square feet of floor area in the Demised Premises and the denominator of which shall be the number of gross leasable square feet of the Demised Premises and such other portions of the property which are so assessed with the Demised Premises. For any tax year during which this Lease is not in effect for the entire tax year, the proportionate share of Taxes payable by Tenant hereunder shall be prorated on a daily basis based on the number of days in such tax year that this Lease is in effect.

(b)

Tenant shall also be liable for and shall pay on or before when due all taxes, assessments, impositions or charges levied on or with respect to or based on the rents payable under this Lease and Tenant shall provide Landlord with copies of receipts evidencing payment of all such rent and taxes; provided, however, that Tenant shall not be responsible for any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax that is or may be

imposed upon Landlord. In addition, Tenant shall be liable for and shall pay on or before when due all taxes levied against personal property and fixtures in the Demised Premises.

(c)

Tenant may, alone or along with any other tenants of the property, at its or their sole cost and expense and in its or their own name(s), dispute and contest any "Taxes" by appropriate proceedings diligently conducted in good faith, but only after Tenant and all other tenants, if any, joining with Tenant in such contest have deposited with Landlord the amount so contested and unpaid, or their proportionate shares thereof as the case may be, which shall be held by Landlord without obligation for interest until the termination of the proceedings, at which time the amount(s) deposited shall be applied by Landlord toward the payment of the items held valid (plus any court costs, interest, penalties and other liabilities associated with the proceedings), and Tenant's share of any excess deposit shall be returned to Tenant. Tenant further agrees to pay to Landlord upon demand Tenant's share (as among all tenants who participated in the contest) of all court costs, interest, penalties and other liabilities relating to such proceedings. Tenant hereby indemnifies and agrees to hold harmless the Landlord from and against any cost, damage or expense (including attorneys' fees) in connection with any such proceedings.

16.3.

If Tenant should fail to pay any taxes, assessments, or governmental charges required to be paid by Tenant hereunder, then in addition to any other remedies provided herein, Landlord may, if it so elects, pay such taxes, assessments, and governmental charges. Any sums so paid by Landlord shall accrue interest from the date of payment by Landlord until repaid by Tenant, with such interest to be at the lesser of (i) the maximum legal rate allowed by law, or (ii) ten percent (18%) per annum, and such sums so paid by Landlord, together with such interest accrued thereon, shall be due and payable on demand and shall be deemed to be additional rental due hereunder.

ARTICLE XVII. Default by Tenant and Remedies

17.1

The following events shall be deemed to be events of default by Tenant under this Lease:

(a)

Tenant shall fail to pay when due any installment of rental or any other sums required to be paid by Landlord as herein provided.

(b)

Tenant shall fail to occupy the Demised Premises within thirty (30) days of written notice by Landlord that the premises are substantially completed in accordance with this Lease or shall later abandon the Premises.

(c)

Tenant shall fail to comply with any term, provision or covenant of this Lease, other than the payment of rental or expenses demanded by the Landlord, and shall not cure such failure within ten (10) days after written notice thereof to Tenant; provided that if the appropriate cure should reasonably require more than ten days, then Tenant shall have a reasonable period of time to complete said cure, so long as Tenant commences the cure within said ten day period and proceeds diligently to completion of same.

(d)

Tenant or any guarantor of Tenants obligations under this Lease shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors.

(e)

Tenant or any guarantor of Tenant's obligations under this Lease shall file a petition under any section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statue of the United States or any State thereof; or Tenant or any guarantor of Tenant's obligations under this Lease shall be adjudged bankrupt or insolvent in proceedings filed against Tenant or any guarantor of Tenant's obligations under this Lease.

(f)

A receiver or Trustee shall be appointed for Tenant's interest in the Demised Premises or for all or substantially all of the assets of Tenant or any guarantor of Tenant's obligations under this Lease.

(g)

Tenant shall do or permit to be done anything which creates a lien upon the Demised Premises.

(h)

The business operated by Tenant in the Demised Premises shall be closed by governmental or court order for failure to pay any State sales tax as required or for any other reason.

17.2

Upon the occurrence of any such events of default, Landlord shall have the option to pursue any one or more of the following remedies without any further notice of demand whatsoever:

(a)

Terminate this Lease, in which event Tenant shall immediately surrender the Demised Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages rental, enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said premises or any part thereof, without being liable for prosecution or any claim of damages therefore.

(b)

Enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said premises or any part thereof, without being liable for prosecution or any claim for damages therefore, with or without having terminated this Lease. Tenant shall remain liable for any and all Monthly Payments, rent and other charges hereunder.

(c)

Enter upon the Demised Premises without being liable for prosecution or any claim for damages therefore, and do whatever Tenant is obligated to do under the terms of this Lease, and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from such action. Any sums

so paid by Landlord shall accrue interest from the date of payment by Landlord until repaid by Tenant, with such interest to be at the maximum legal rate allowed by law, and such sums so paid by Landlord, together with accrued interest thereon, shall be due payable upon demand and shall be deemed to be additional rental due hereunder.

(d)

Alter all locks and other security devices at the Demised Premises without terminating this Lease.

(e)

Bring suit for the collection of rents or any damages resulting from Tenant's default without entering into possession of the Demised premises or voiding this Lease.

17.3

Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Demised Premises by Tenant whether by agreement or by operation of law, it being understood that such surrender can be effected only by the written agreement of Landlord and Tenant. No alteration of locks or other security devices and no removal or other exercise of dominion by Landlord over the property of Tenant or others at the Demised Premises shall be deemed unauthorized or constitute a conversion, Tenant hereby consenting, after any event of default, to the aforesaid exercise of dominion over Tenant's property within the Demised Premises. All claims for damages by reason of such re-entry and/or repossession and/or alteration of locks or other security devices are hereby waived, as are all claims for damages by reason of any distress warrant, forcible detainer proceedings, sequestration proceedings or other legal process. Tenant agrees that any re-entry by Landlord may be pursuant to judgment obtained in forcible detainer proceedings or other legal proceedings as Landlord may elect, and Landlord shall not be liable in trespass or otherwise.

17.4

In the event Landlord elects to terminate this Lease by reason of an event of default, then notwithstanding such termination, Tenant shall be liable for and shall pay to Landlord, at the address specified for notice to Landlord herein, the sum of all rental and other indebtedness accrued to date of such termination plus, as damages, an amount equal to the difference between (i) the total Minimum Guaranteed Rental, computed as stated below in Section 17.6) plus Tenant's Common Area Maintenance Charge, Insurance Payment and Tax Payment hereunder for remaining portion of the Lease Term (had such term not been terminated by Landlord prior to the date of expiration stated in Article I) and (ii) the then present value of the then fair market rental value of the Demised Premises for such period.

17.5

In the event that Landlord elects to repossess the Demised Premises without terminating this Lease, then Tenant shall be liable for and shall pay to Landlord at the address specified for notice to Landlord herein all rental and other indebtedness accrued to the date of such repossession, plus Landlord may accelerate to the date of default all monthly payments required to be paid by Tenant to Landlord during the remainder of the Lease Term as stated in Article I. Said amount may be calculated by the approximation of historical costs of said amount to the remainder of the Lease. That amount may be offset by any actual net sums thereafter received by Landlord through reletting the Demised Premises during said period (after deducting expenses incurred by Landlord as provided in Article XVII, Section 17.7 hereof). In no event shall Tenant be entitled to

any excess of any rental obtained by reletting over and above the rental herein reserved. Actions to collect amounts due by Tenant to Landlord as provided in this Article XVII, Section 17.7 may be brought from time to time, on one or more occasions, without the necessity of Landlord's waiting until expiration of the Lease Term.

17.6

In case of any event of default or breach by Tenant, Tenant shall also be liable for and shall pay to Landlord, at the address specified for notice to Landlord herein, in addition to any sum provided to be paid above brokers' fees incurred by Landlord in connection with reletting the whole or any part of the Demised Premises; the costs of removing and storing Tenant's or other occupant's property; the costs of repairing, altering, remodeling or otherwise putting the Demised Premises into condition acceptable to a new tenant or tenants; and all reasonable expenses incurred by Landlord in enforcing or defending Landlord's rights and/or remedies, including reasonable attorneys' fees (at all tribunals, before and during trial and on appeal).

17.7

In the event of termination or repossession of the Demised Premises for an Event of Default, Landlord shall attempt to relet the Demised Premises, or any portion thereof, to collect rental after reletting; and in the event of reletting, Landlord may relet the whole or any portion of the Demised Premises, as agent for Tenant or for Landlord's own account, for any period to any tenant and for any use and purpose. Landlord shall owe no duty or obligation to Tenant if Landlord attempts to relet the Demised Premises or attempts in any way to mitigate Landlord's damages in the event of termination or repossession of the Demised Premises for an Event of Default.

17.8

If Tenant should fail to make any payment as due or cure any default hereunder within the time herein permitted, Landlord without being under any obligation to do so and without thereby waiving such default, may make such payment and/or remedy such other default for the account of Tenant (and enter the Demised Premises for such purpose), and hereupon Tenant shall be obligated to, and hereby agrees, to pay Landlord, upon demand, all costs, expenses and disbursements (including reasonable attorneys' fees at all tribunals, including appeals) incurred by Landlord in taking such remedial action. All rental amounts and any other charges and expenses to be paid by Tenant to Landlord hereunder which are not paid when due shall bear interest at the maximum interest rate then allowable under the laws of the State of Utah and such interest charge shall accrue from the date payment is due until the date paid.

17.9

Upon receipt from Tenant of the sum stated in Article I, Section 1.1(m) above (the "Security Deposit"), such sum shall be held by Landlord without interest as security for the performance by Tenant of Tenant's covenants and obligations under this Lease, it being expressly understood that such deposit is not an advance payment of rental or a measure of Landlord's damages in case of default by Tenant. Said deposit shall be held by Landlord without payment of interest, as security for the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease by Tenant to be kept and performed during the terms hereof. If at any time during the term of this Lease, any of the rental herein reserved shall be overdue and unpaid, then Landlord may, at the option of Landlord (but Landlord shall not be required to) appropriate and apply any portion of the Security Deposit to the payment of any such overdue rental or other

sum. In the event of the failure of Tenant to keep and perform any of the terms, covenants and conditions of this Lease to be kept and performed by Tenant, then Landlord at its option may appropriate and apply the Security Deposit, or so much thereof as may be necessary, to compensate the Landlord for loss or damage sustained or suffered by Landlord due to such breach on the part of Tenant. Should the Security Deposit, or any portion thereof, be appropriated and applied by Landlord for the payment of overdue rental or other sums due and payable to Landlord by Tenant hereunder, then Tenant shall, upon the written demand of Landlord, forthwith remit to Landlord a sufficient amount in cash to restore the Security Deposit to the original sum deposited, and Tenant's failure to do so within five (5) days after receipt of such demand shall constitute an event of default under this Lease. Should Tenant comply with all of the terms, covenants and conditions of this Lease and promptly pay all of the rental herein provided for as it falls due and all other sums payable by Tenant to Landlord hereunder, the Security Deposit (less any sums incurred or expended by Landlord in cleaning and restoring the Demised Premises) shall be returned to Tenant at the end of the Lease Term or upon the earlier termination of this Lease.

17.10

Landlord’s Default; Tenant’s Remedies. In the event of any failure by Landlord to perform any Term, condition, covenant or obligation of this Lease on the part of Landlord to be performed within thirty (30) days after the date on which Landlord receives from Tenant notice specifically describing such failure, Tenant (in addition to all other remedies to which Tenant may be entitled under this instrument or at law or in equity) may cure such default by Landlord on behalf of, and at the sole cost and expense of, Landlord. Landlord shall reimburse Tenant for its costs and expenses in connection therewith within thirty (30) days after Tenant’s delivery to Landlord of an invoice therefor. If the failure or default cannot be corrected within the thirty (30) day time period, Tenant may terminate the lease with thirty (30) days written notice to Landlord. The foregoing notwithstanding, if Landlord shall exercise in good faith diligent efforts within such thirty (30) day period to cure the failure specified in the notice but shall not be able to do so because of acts of God, riots, or labor strikes or other circumstances beyond reasonable control of Landlord, then any such failure shall not be considered a default of this Lease by Landlord so long as Landlord shall continue to exercise in good faith such diligent efforts to cure such failure and shall do so within a reasonable period of time.

In the event of any default by Landlord, Tenant's exclusive remedy shall be an action for damages (Tenant hereby waiving the benefit of any laws granting it a lien upon the property of Landlord and/or upon rent due Landlord), but prior to any such action Tenant will give Landlord written notice specifying such default with particularity, and Landlord shall have a period of thirty (30) days following the date of such notice in which to commence the appropriate cure of such default. Unless and until Landlord fails to commence and diligently pursue the appropriate cure of such default after such notice or complete same within a reasonable period of time, Tenant shall not have any remedy or cause of action by reason thereof. All obligations of Landlord hereunder will be construed as covenants, not conditions; and all such obligations will be binding upon Landlord only during the period of its possession of the property and not thereafter.

The term "Landlord" shall mean only the owner, for the time being of the property and in the event of the transfer by such owner of its interest in the property, such owner shall thereupon be released and discharged from all covenants and obligations of Landlord thereafter accruing, but such covenants and obligations shall be binding during the Lease Term upon each new owner for the duration of such new owner's ownership.

Notwithstanding any other provision hereof, Landlord shall not have any personal liability hereunder. In the event of any breach or default by Landlord of term or provision of this Lease, Tenant agrees to look solely to the equity or interest then owned by Landlord in the land and improvements which constitute the property; however, in no event, shall any deficiency judgment or any money judgment of any kind be sought or obtained against any party Landlord.

17.11

In the event that Landlord shall have taken possession of the Demised Premises pursuant to the authority herein granted, then Landlord shall have the right to keep in place and use all of the furniture, fixtures and equipment at the Demised Premises, including that which is owned by or leased to Tenant, at all times prior to any foreclosure thereon by Landlord or repossession thereof or third party having a lien thereon. Landlord shall also have the right to remove from the Demised Premises (without the necessity of obtaining a distress warrant, writ of sequestration or other legal process) all or any portion of such furniture, fixtures, equipment and other property located thereon and place same in storage at any premises within the County in which the Demised Premises is located; and in such event, Tenant shall be liable to Landlord for costs incurred by Landlord in connection with such removal and storage and shall indemnify and hold Landlord harmless from all loss, damage, cost, expense and liability in connection with such removal and storage. Landlord shall also have the right to relinquish possession of all or any portion of such furniture, fixtures, equipment and other property to any person ("Claimant") claiming to be entitled to possession thereof who presents to Landlord a copy of any instrument represented to Landlord by Claimant to have been executed by Tenant (or any predecessor of Tenant) granting Claimant the right under various circumstances to take possession of such furniture, fixtures, equipment or other property, without the necessity on the part of Landlord to inquire into the authenticity of said instrument's copy of Tenant's or Tenant's predecessor's signature thereon and without the necessity of Landlord's making any nature of investigation or inquiry as to the validity of the factual or legal basis upon which Claimant purports to act. Tenant agrees to indemnify and hold Landlord harmless from all cost, expense, loss, damage and liability incident to Landlord's relinquishment of possession of all or any portion of such furniture, fixtures, equipment or other property to Claimant. The rights of Landlord herein stated shall be in addition to any and all other rights which Landlord has or may hereafter have at law or in equity, and Tenant stipulates and agrees that the rights herein granted Landlord are commercially reasonable. Landlord shall in no event be liable to Tenant, including without limitation, liability for trespass or conversion, with respect to any actions taken pursuant to this Section 17.11.

ARTICLE XVIII. Landlord's Lien

18.1

To secure the payment of all rental and other sums of money due and to become due hereunder and the faithful performance of this Lease by Tenant, Tenant hereby gives to

Landlord an express first and prior contract lien and security interest on all property now or hereafter acquired, (including fixtures and equipment) but specifically excluding all proceeds of any insurance which may accrue to Tenant by reason of destruction of or damage to any such property. Such property shall not be removed therefrom without the written consent of Landlord until all arrearages in rental and other sums of money then due to Landlord hereunder shall be cumulative thereto. Upon the occurrence of an event of default, this lien may be foreclosed with or without court proceedings by public or private sale, provided Landlord gives Tenant at least fifteen (15) days written notice of the time and place of said sale, and Landlord shall have the right to become the purchaser, upon being the highest bidder at such sale. Contemporaneous with the execution of this Lease (and if requested hereafter by Landlord), Tenant shall execute and deliver to Landlord Uniform Commercial Code financing statements in sufficient form so that when properly filed, the security interest hereby given shall thereupon be perfected. If requested hereafter by Landlord, Tenant shall also execute and deliver to Landlord Uniform Commercial Code financing statement change instruments in sufficient form to reflect any proper amendment or modification in or extension of the aforesaid contract lien and security interest hereby granted. Landlord shall, in addition to all of its rights hereunder, also have all of the rights and remedies of a secured party under the Uniform Commercial Code as adopted in the State in which the Demised Premises are located. To the extent permitted by law, this Lease shall constitute a security agreement under Article 9 of the Uniform Commercial Code. Tenant shall deliver to Landlord at least annually, a complete list of all equipment, fixtures, furniture, office items and other goods held in the Demised Premises. Tenant agrees Landlord may file this Agreement or a separate financing as it deems necessary to perfect this security interest.

ARTICLE XIX. Holding Over

19.1

In the event Tenant remains in possession of the Demised Premises after the expiration of this Lease and without the execution of a new lease or any extension or renewal hereof, Landlord reserves the right to declare this Lease renewed under the terms and conditions of this Lease. In the alternative, Landlord may demand of Tenant for every month Tenant remains in possession two hundred percent (200%) of the greater (i) the then market rental rate for the Demised Premises or (ii) the Minimum Guaranteed Rental paid by Tenant under the terms of this Lease immediately prior to the expiration hereof, with resulting tenancy constituting a tenancy at sufferance. In the event that Tenant executes a new lease within sixty (60) days after the expiration of the term of this Lease, then Tenant's occupancy of the Demised Premises during such sixty (60) day period shall be governed by the terms and provisions of said new Lease.

ARTICLE XX. Subordination and Park Covenants

20.1

Tenant accepts this Lease subject and subordinate to any mortgage, ground lease or other lien presently existing or hereafter created upon the Demised Premises or the property, and to any renewals and extensions thereof, but Tenant agrees that any mortgagee, ground lessor or other lien or shall have the right at any time to subordinate this Lease to any mortgage, ground lease or other lien hereafter placed upon the Demised Premises or the property, and Tenant agrees upon demand to execute such further instruments subordinating this Lease as Landlord may request.

Further, Tenant agrees to attorn to any successor-in-interest of Landlord and to execute an instrument evidencing such agreement upon request by Landlord. The terms of this Lease are subject to approval by the lender providing the permanent financing for the property and such approval is a condition precedent to Landlord's obligations hereunder.

20.2 If the project is located in, is part of, or subsequent to the date hereof is incorporated into any office park, industrial park, business park or similar entity (the "Park"), this Lease shall be subject to all of the terms, covenants, restrictions, development criteria or other such regulations for the Park (the "covenants"). Tenant hereby accepts its leasehold estate subject to such covenants and agrees to conform and comply with all provisions contained therein or to allow Landlord or the deliriant of the covenants to fulfill all obligations imposed pursuant thereto. Any failure by Tenant to comply with such covenants shall constitute a default under this Lease. Tenant shall pay, as part of the operating expenses for the project, its proportionate share of any costs imposed upon the project as a result of the project's association with the Park including, but not limited to, owner's association fees, and maintenance costs and real estate taxes associated with any common areas of the Park.

ARTICLES XXI. Notices

21.1

Wherever any notice is required or permitted hereunder, such notice shall be in writing. Any notice of document required or permitted to be delivered hereunder shall be deemed to be delivered (whether actually received or not) when deposited in the United States Mail, postage prepaid, Certified or Registered Mail, Return Receipt Requested, or when transmitted by special courier or express mail service furnishing evidence of delivery, addressed to the parties hereto at the respective addresses set out in Article I, Section 1.1 above, or at such other addresses as they may have hereafter specified by written notice given in accordance with this Section 21.1.

21.2

If and when included within the term "Landlord" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such notices specifying some individual at some specific address for the receipt of all notices and payments to Landlord. If and when included within the term "Tenant" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such notices, specifying some individual at some specific address for the receipt of all notices and payments to Tenant. All parties included within the term "Landlord" and "Tenant" respectively, shall be bound by notices and payments given in accordance with the provisions of this Article, to the same effect as if each had received such notice or payment.

21.3

Tenant makes the following representations to Landlord on which Landlord is entitled to rely in executing this Lease: (i) Tenant is a Limited Liability Company , duly organized and existing under the laws of the State of Utah , and has the power to enter into this Lease and the transaction contemplated hereby and to perform its obligations hereunder, and by proper resolution the signatory hereto has been duly authorized to execute and deliver this Lease; and (ii) the execution, delivery and performance of this Lease and the consummation of the transactions herein

contemplated shall not conflict with or result in the violation of, breach of, or a default under Tenant's articles of incorporation or bylaws or partnership agreements, as amended, or any indenture, mortgage, deed of trust, note, security agreement or other agreement or instrument to which Tenant is a party or by which it is bound or to which any of its properties is subject.

ARTICLE XXII. Late Charges

22.1

In the event Tenant fails to pay the Landlord when due any installment of rental or other sum to be paid to Landlord which may become due hereunder, Landlord will incur additional expenses in an amount not readily ascertainable and which has not been elsewhere provided for between Landlord and Tenant. Therefore, if Tenant should fail to pay Landlord when due any monthly payment or other sum to be paid hereunder, Tenant will pay Landlord a late charge of five (5%) percent thereof. Failure to pay such late charge upon demand therefore shall be an event of default hereunder. Provision for such late charge shall be in addition to all other rights and remedies available to Landlord hereunder or at law or in equity and shall not be construed as liquidated damages or limiting Landlord's remedies in any manner.

ARTICLE XXIII. Miscellaneous

23.1

Nothing herein contained shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between parties hereof, it being understood and agreed that neither the method of computation of rental, nor any other provisions contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant. Whenever herein the singular number is used, the same shall include the plural, and words of any gender shall include each other gender.

23.2

The captions used herein are for convenience only and do not limit or amplify the provisions hereof.

23.3

One or more waivers of any covenant, term or condition of this Lease by Landlord shall not be construed as a waiver of subsequent breach of the same covenant, term or condition. The waiver by Landlord of a breach hereunder shall not be construed as a waiver of a subsequent breach of the same covenant, term or condition. The consent or approval by Landlord to or of any act by Tenant requiring such consent or approval shall not be deemed to waive or render unnecessary consent to or approval of any subsequent similar act.

23.4

Whenever a period of time herein prescribed for action to be taken by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any other causes of any kind whatsoever which are beyond the reasonable control of Landlord. At any time when there is outstanding a mortgage, ground Lease or similar security instrument covering Landlord's interest in the Demised Premises, Tenant may not exercise any remedies for default by Landlord hereunder

unless and until the holder of the indebtedness secured by such mortgage, ground lease or similar security instrument shall have received written notice of such default and a reasonable time for curing such default shall thereafter have elapsed. Except as otherwise provided above, time shall be of the essence of this Lease.

23.5

Landlord agrees that if Tenant shall perform all of the covenants and agreements herein required to be performed by Tenant, Tenant shall, subject to the terms of this Lease, at all times during the continuance of this Lease have the peaceable and quiet enjoyment and possession of the Demised Premises.

23.6

Landlord and Tenant each represent and warrant one to the other that except as may be hereinafter set forth, neither of them has employed any broker in connection with the negotiations of the terms of this Lease or the execution thereof. Landlord and Tenant hereby agree to indemnify and to hold each other harmless against any loss, expense or liability with respect to any claims for commissions or brokerage fees arising from or out of any breach of the foregoing representation and warranty. Landlord recognizes Ben Richardson as the broker exclusively representing Tenant. Landlord is exclusively represented by Coldwell Banker Commercial Advisors Ben Richardson. Landlord has entered into a commission agreement with his agent Coldwell Banker Commercial Intermountain.

23.7

Tenant shall at any and from time to time upon not less than five (5) days' prior written request by Landlord, execute, acknowledge and deliver to Landlord a statement in writing executed by Tenant certifying that this Lease is in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified) and that Tenant is in possession of the Demised Premises, stating the dates to which rent and other charges payable under the Lease have been paid, and stating that Landlord is not in default hereunder (of if Tenant alleges a default stating the nature of such alleged default) and further stating such other matters as Landlord or its lender or purchaser shall reasonably require. It is intended that any such statement executed by Tenant may be relied upon by any prospective purchaser or mortgagee of the property or land upon which it is situated. In the event that Tenant should fail to execute such a statement promptly as requested, Tenant hereby irrevocably constitutes Landlord as its attorney-in-fact to execute such instruments in Tenant's name, place and stead, it being further agreed that Tenant shall be deemed to have acknowledged and agreed to the provisions of said statement.

23.8

The laws of the State of Utah shall govern the interpretation, validity, performance and enforcement of this Lease. If any provision of this Lease should be held to be invalid or unenforceable, the validity and enforceability of the remaining provisions of this Lease shall not be affected thereby. Tenant hereby waives any right to trial by jury in this action. Venue shall be in Utah County, Utah.

23.9

Time is of the essence as to all terms of this Lease.

23.10

The terms, provisions and covenants contained in this Lease shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors in interest and legal representatives, except as otherwise herein expressly provided.

23.11

Tenant agrees not to record this Lease or any memorandum thereof, but Landlord may record this Lease or a memorandum thereof, at its sole election, and Tenant agrees to execute such memorandum upon request by Landlord.

23.12

Landlord shall have the right to transfer and assign in whole or part, all its rights and obligations hereunder and/or in the property and the Demised Premises referred to herein; and in such event and upon such transfer Landlord shall be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of Landlord for the performance of all obligations arising under the Lease.

23.13

Tenant expressly acknowledges that it shall have no benefits or rights with respect to the enforcement of any restrictive covenants affecting the property.

23.14

Landlord has delivered a copy of this Lease to Tenant for Tenant's review only, and the delivery hereof does not constitute an offer to Tenant or an option to lease. This Lease shall not be effective until a copy executed by both Landlord and Tenant is delivered to and accepted by Landlord.

23.15

Hazardous Materials

(A)

"Except for products reasonably necessary and customarily associated with the use of the Premises, Tenant shall not use, generate, manufacture, produce, store, release, discharge or dispose of on, in or under the Premises or the property of which the Premises are a part (the "Property"), or transport to or from the Premises or the Property, any Hazardous Materials (as defined below), or allow any other person or entity to do so.

(B)

Tenant shall comply with all local, state or federal laws, ordinances or regulations relating to Hazardous Materials on, in, under or about the Premises.

(C)

Tenant shall promptly notify Landlord should Tenant receive notice of or otherwise become aware of any (i) pending or threatened environmental regulatory action against Tenant, the Premises or the Property; (ii) claims made or threatened by any third party relating to any loss or injury resulting from any Hazardous Material; or (iii) release or discharge or threatened release or discharge of any Hazardous Material in, on, under or about the Premises or the Property.

(D)

Tenant shall protect, indemnify and hold harmless Landlord, its directors, officers, employees, agents, successors and assigns from and against any and all loss, damage, cost, expense or liability (including attorney's fee and costs) to comply with this section 23.15, including without limitation (i) all foreseeable consequential damages; and (ii) the costs of any required or necessary repair, detoxification, or cleanup of the Premises or the Property and the preparation and

implementation of any closure, remedial or other required plans. This indemnity shall survive termination or cancellation of this Lease for any reason.

(E)

Upon 24 hours prior notice, Tenant shall permit Landlord or its agents to inspect the Premises in order to confirm Tenant's compliance with this section 23.15; Tenant shall also provide Landlord copies of all notices it may receive concerning the environmental condition of the Premises (or the Property) from any governmental agency.

(F)

"Hazardous Materials" shall mean any flammable explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including, without limitation, any substances defined as or included in the definition of "hazardous substances", hazardous wastes", hazardous materials", or "toxic substances", under any applicable federal or state laws or regulations, as now existing or hereafter amended.

23.16

(A)

Tenant represents and warrants that it is not acting, directly or indirectly, for or on behalf of any person, group, entity, or nation named by the United States Treasury Department as a Specially Designated National and Blocked Person, or for or on behalf of any person, group, entity, or nation designated in Presidential Executive Order 13224 as a person who commits, threatens to commit, or supports terrorism; and that it is not engaged in this Lease directly or indirectly on behalf of, or facilitating this Lease directly or indirectly on behalf of, any such person, group, entity, or nation. Tenant agrees to defend, indemnify, and hold harmless Landlord from and against any and all claims, damages, losses, risks, liabilities, and expenses (including reasonable attorneys’ fees and costs) arising from or related to any breach of the foregoing representation and warranty.

THIS LEASE CONTAINS THE ENTIRE AGREEMENT BETWEEN THE PARTIES, AND NO AGREEMENT SHALL BE IN EFFECT TO CHANGE, MODIFY OR TERMINATE THIS LEASE IN WHOLE OR IN PART UNLESS SUCH AGREEMENT IS IN WRITING AND DULY SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT OF SUCH CHANGE, MODIFICATION OR TERMINATION IS SOUGHT. TENANT SHALL NOT BE ENTITLED TO RELY ON ANY REPRESENTATIONS OR WARRANTIES OF LANDLORD OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS LEASE OR HEREIN

EXECUTED

by the parties hereto and dated as of this

day of

, 2015.

LANDLORD:

WI Commercial West LLC

Witnesses as to Landlord:

By: /s/ Mark Weldon

Mark Weldon : president

Witnesses as to Tenant:

TENANT

Forever Green

By: /s/Jack B. Eldridge Jr.

Its: Chief Financial Officer


Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets (unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (unaudited)	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4.	Controls and Procedures	18


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 6.	Exhibits	19
Signatures		20


ForeverGreen Worldwide Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
		September 30, 2016		December 31, 2015
ASSETS		(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	398,165	$	495,304
Restricted cash		50,305		62,382
Accounts receivable, net		600,140		688,719
Member advances		158,652		165,521
Other receivables		760,162		43,297
Prepaid expenses and other assets		525,203		512,023
Inventory, net		2,440,636		2,027,642
Total Current Assets		4,933,263		3,994,888
PROPERTY AND EQUIPMENT, net		4,071,107		3,493,170
OTHER ASSETS
Deposits and other assets		176,352		195,656
Intangible assets, net		42,190		97,724
Total Other Assets		218,542		293,380
TOTAL ASSETS	$	9,222,912	$	7,781,438

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Bank overdraft	$	230,377	$	125,482
Accounts payable		3,457,081		3,048,537
Accrued expenses		2,912,758		2,757,775
Deferred revenue		91,907		87,396
Convertible notes payable, related parties		--		245,000
Convertible notes payable		1,191,718		1,423,474
Total Current Liabilities		7,883,841		7,687,664

LONG-TERM DEBT
Convertible notes payable		931,756		--
Convertible notes payable, related parties		1,746,024		1,501,024
Notes payable, net of discount		871,195		--
Total Long-Term Debt		3,548,975		1,501,024
TOTAL LIABILITIES		11,432,816		9,188,688

COMMITMENTS AND CONTINGENCIES		--		--

STOCKHOLDERS' DEFICIT
Preferred stock; no stated par value; authorized 10,000,000 shares; no shares issued or outstanding		--		--
Common stock, par value $0.001 per share; authorized
100,000,000 shares; 25,342,285 and 25,342,285 shares
issued and outstanding, respectively		25,342		25,342
Additional paid-in capital		35,952,711		35,897,711
Accumulated other comprehensive loss		(384,208)		(490,974)
Accumulated deficit		(37,803,749)		(36,839,329)
Total Stockholders' Deficit		(2,209,904)		(1,407,250)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	9,222,912	$	7,781,438


		Three months ended September 30,				Nine months ended September 30,
		2016		2015		2016		2015

REVENUES, net	$	8,238,081	$	16,606,907	$	30,980,113	$	49,884,864
COST OF SALES, net		2,278,106		3,882,920		9,186,327		12,115,664
GROSS PROFIT		5,959,975		12,723,987		21,793,786		37,769,200

OPERATING EXPENSES
Sales and marketing		3,502,298		7,825,701		12,376,749		23,904,165
General and administrative		2,970,039		5,176,748		10,689,360		14,904,798
Total Operating Expenses		6,472,337		13,002,449		23,066,109		38,808,963

NET OPERATING INCOME (LOSS)		(512,362)		(278,462)		(1,272,323)		(1,039,763)

OTHER INCOME (EXPENSE)
Interest expense		(152,399)		(76,633)		(384,207)		(215,849)
Gain on legal settlement		--		--		698,113		--
Other income (expense)		33,141		(16,306)		(6,003)		(227,208)
Total Other Income (Expense)		(119,258)		(92,939)		307,903		(443,057)

Loss before income taxes		(631,620)		(371,401)		(964,420)		(1,482,820)

Income taxes		--		--		--		--

NET LOSS	$	(631,620)	$	(371,401)	$	(964,420)	$	(1,482,820)

BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.02)	$	(0.01)	$	(0.04)	$	(0.06)

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING		25,342,285		25,342,285		25,342,285		24,448,883

COMPREHENSIVE LOSS
A Summary of the components of other comprehensive loss for the periods ended September 30, 2016 and 2015 are as follows:

Net Loss	$	(631,620)	$	(371,401)	$	(964,420)	$	(1,482,820)
Other Comprehensive Income (Loss) - foreign currency translation		163,497		(72,977)		106,766		42,289
Comprehensive Loss	$	(468,123)	$	(444,378)	$	(857,654)	$	(1,440,531)


ForeverGreen Worldwide Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
		September 30, 2016		September 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES :
Net loss	$	(964,420)	$	(1,482,820)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization		840,437		551,229
Convertible note interest penalty		--		30,000
Changes in operating assets and liabilities:
Restricted cash		12,077		(179,688)
Accounts receivable		88,579		(1,048,441)
Other receivables		(716,865)		--
Member advances		6,869		--
Prepaid expenses		(13,180)		(671,338)
Deposits and other assets		19,304		25,591
Inventory		(412,994)		(294,235)
Accounts payable		408,544		1,927,401
Deferred revenue		4,511		1,613,453
Accrued expenses		154,983		(2,000,168)
Net Cash Used in Operating Activities		(572,155)		(1,529,016)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(799,602)		(1,308,467)
Net Cash Used in Investing Activities		(799,602)		(1,308,467)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank overdraft		104,895		(59,138)
Proceeds from convertible notes payable		900,000		1,790,000
Repayment of convertible notes payable		(200,000)		--
Repayment of notes payable		(137,043)		(100,000)
Proceeds from notes payable		500,000		--
Proceeds from common stock issuance		--		1,020,117
Net Cash Provided by Financing Activities		1,167,852		2,650,979
Effect of Foreign Currency on Cash		106,766		48,010

NET DECREASE IN CASH		(97,139)		(138,494)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		495,304		580,522
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	398,165	$	442,028

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	239,213	$	215,849
Cash paid for income taxes		--		--

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for convertible notes payable	$	--	$	636,645
Notes payable issued for leasehold improvements	$	506,158	$	--
Beneficial conversion feature	$	55,000	$	--
Debt discount on notes payable	$	25,000	$	--
The accompanying notes are an integral part of these condensed consolidated financial statements


SUMMARY OF OPERATIONS		Three month period ended September 30,			Nine month period ended September 30,
		(Unaudited)			(Unaudited)
		2016		2015		2016		2015
Revenues, net	$	8,238,081	$	16,606,907	$	30,980,113	$	49,884,864
Cost of sales		2,278,106		3,882,920		9,186,327		12,115,664
Gross profit		5,959,975		12,723,987		21,793,786		37,769,200
Selling and marketing expenses		3,502,298		7,825,701		12,376,749		23,904,165
General and administrative expenses		2,970,039		5,176,748		10,689,360		14,904,798
Total operating expenses		6,472,337		13,002,449		23,066,109		38,808,963
Net operating income		(512,362)		(278,462)		(1,272,323)		(1,039,763)
Total other income (expense)		(119,258)		(92,939)		307,903		(443,057)
Income tax provision		--		--		--		--
Net earnings (loss)	$	(631,620)	$	(371,401)	$	(964,420)	$	(1,482,820)
Net earnings (loss) per share both (basic) and diluted	$	(0.02)	$	(0.01)	$	(0.04)	$	(0.06)


SUMMARY OF BALANCE SHEET		Nine months ended September 30, 2016		Year ended December 31, 2015
		(Unaudited)
Cash and cash equivalents	$	398,165	$	495,304
Total current assets		4,933,263		3,994,888
Total assets		9,222,912		7,781,438
Total current liabilities		7,883,841		7,687,664
Total liabilities		11,432,816		9,188,688
Accumulated deficit		(37,803,749)		(36,839,329)
Total stockholders’ deficit	$	(2,209,904)	$	(1,407,250)


No.		Description
31.1		Chief Executive Officer Certification
31.2		Chief Financial Officer Certification
32		Section 1350 Certification


No.		Description
3(i)		Articles of incorporation, as revised (Incorporated by reference to exhibit 3.1 for Form 8-K, as amended, filed December 18, 2006)
3(ii)		Bylaws, as revised (Incorporated by reference to exhibit 3.2 for Form 8-K, as amended, filed December 18, 2006)
10.1		Lease agreement between ForeverGreen International LLC and WI Commercial West Lindon LLC, dated September 29, 2015
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document.
101.PRE		XBRL Taxonomy Presentation Linkbase Document.