Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Feb. 20, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | Where Food Comes From, Inc. | ||
Entity Central Index Key | 1,360,565 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 28,231,262 | ||
Entity Common Stock, Shares Outstanding | 24,652,187 | ||
Closing Stock Price | $ 2.55 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 2,489,985 | $ 3,529,680 |
Accounts receivable, net of allowance | 1,344,646 | 1,110,052 |
Short-term investments | 733,104 | 251,717 |
Prepaid expenses and other current assets | 203,744 | 154,912 |
Total current assets | 4,771,479 | 5,046,361 |
Property and equipment, net | 1,229,350 | 157,950 |
Intangible and other assets, net | 4,228,228 | 1,760,199 |
Goodwill | 2,652,250 | 1,279,762 |
Deferred tax assets, net | 231,452 | |
Total assets | 12,881,307 | 8,475,724 |
Current liabilities: | ||
Accounts payable | 333,784 | 417,836 |
Accrued expenses and other current liabilities | 480,047 | 92,574 |
Customer deposits | 80,832 | 77,784 |
Deferred revenue | 443,564 | 194,087 |
Current portion of notes payable | 7,846 | |
Current portion of capital lease obligations | 4,067 | 4,634 |
Total current liabilities | 1,342,294 | 794,761 |
Capital lease obligations, net of current portion | 15,735 | 1,776 |
Notes payable and other long-term liabilities, net of current portion | 8,365 | |
Lease incentive obligation | 158,025 | |
Deferred tax liabilities | 49,440 | |
Total liabilities | 1,565,494 | 804,902 |
Commitments and contingencies | ||
Contingently redeemable non-controlling interest | 1,888,135 | 936,370 |
Equity: | ||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding | ||
Common stock, $0.001 par value; 95,000,000 shares authorized; 24,890,121 (2016) and 23,822,295 (2015) shares issued, and 24,647,186 (2016) and 23,736,487 (2015) shares outstanding | 24,890 | 23,822 |
Additional paid-in-capital | 10,052,597 | 7,446,634 |
Treasury stock of 242,935 (2016) and 85,808 (2015) shares | (524,892) | (177,916) |
Accumulated deficit | (124,917) | (558,088) |
Total equity | 9,427,678 | 6,734,452 |
Total liabilities and stockholders' equity | $ 12,881,307 | $ 8,475,724 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 95,000,000 | 95,000,000 |
Common stock, shares issued | 24,890,121 | 23,822,295 |
Common stock, shares outstanding | 24,647,186 | 23,736,487 |
Treasury stock, shares | 242,935 | 85,808 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues: | ||
Service revenues | $ 10,308,670 | $ 9,074,516 |
Product sales | 1,180,919 | 1,209,619 |
Other revenue | 125,444 | 111,334 |
Total revenues | 11,615,033 | 10,395,469 |
Costs of revenues: | ||
Labor and other costs of services | 5,518,024 | 4,810,737 |
Costs of products | 684,121 | 729,979 |
Total costs of revenues | 6,202,145 | 5,540,716 |
Gross profit | 5,412,888 | 4,854,753 |
Selling, general and administrative expenses | 4,778,389 | 4,059,520 |
Income from operations | 634,499 | 795,233 |
Other expense (income): | ||
Interest expense | 1,517 | 1,585 |
Other income, net | (4,131) | (770) |
Income before income taxes | 637,113 | 794,418 |
Income tax expense | 235,547 | 298,150 |
Net income | 401,566 | 496,268 |
Net loss attributable to non-controlling interest | 31,605 | 37,649 |
Net Income attributable to Where Food Comes From, Inc. | $ 433,171 | $ 533,917 |
Per share - net income attributable to Where Food Comes From, Inc.: | ||
Basic | $ 0.02 | $ 0.02 |
Diluted | $ 0.02 | $ 0.02 |
Weighted average number of common shares outstanding: | ||
Basic | 23,818,762 | 23,797,236 |
Diluted | 23,964,026 | 23,974,374 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Operating activities: | ||
Net income | $ 401,566 | $ 496,268 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 267,645 | 256,272 |
Stock-based compensation expense | 121,871 | 117,696 |
Common stock issued for services rendered | 78,750 | |
Deferred tax expense | 169,994 | 298,150 |
Bad debt expense | 5,345 | 7,742 |
Loss on disposal of property and equipment | 7,482 | |
Changes in operating assets and liabilities, net of effect from acquisitions: | ||
Accounts receivable | 50,753 | (240,762) |
Prepaid expenses and other assets | (48,832) | 8,481 |
Short-term investments | (481,387) | (251,717) |
Accounts payable | (222,614) | 16,705 |
Accrued expenses and other current liabilities | 382,958 | 35,419 |
Customer deposits and deferred revenue | 252,525 | 117,863 |
Net cash provided by operating activities | 986,056 | 862,117 |
Investing activities: | ||
Acquisition of Validus Verification Services, Inc., remaining 40% interest | (162,707) | |
Acquisition of 60% interest in SureHarvest LLC | (1,121,990) | |
Purchases of property and equipment | (445,847) | (26,312) |
Proceeds from sale of property and equipment | 11,990 | |
Net cash used in investing activities | (1,718,554) | (26,312) |
Financing activities: | ||
Repayments of notes payable | (16,211) | (7,459) |
Repayments of capital lease obligations | (9,047) | (4,397) |
Restricted cash for line of credit collateral | 250,000 | |
Proceeds from stock option exercise | 65,037 | 50,589 |
Stock repurchase under Buyback Plan | (346,976) | (177,916) |
Net cash provided by (used in) financing activities | (307,197) | 110,817 |
Net change in cash | (1,039,695) | 946,622 |
Cash at beginning of year | 3,529,680 | 2,583,058 |
Cash at end of year | $ 2,489,985 | $ 3,529,680 |
Consolidated Statements of Cas6
Consolidated Statements of Cash Flows (Parenthetical) | Dec. 31, 2016 | Dec. 28, 2016 |
Validus Acquisition [Member] | ||
Percentage of remaining ownership interest | 40.00% | |
SureHarvest Services LLC [Member] | ||
Percentage of remaining ownership interest | 60.00% | 40.00% |
Consolidated Statement of Equit
Consolidated Statement of Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Treasury Stock [Member] | Accumulated Deficit [Member] | Total |
Balance, beginning at Dec. 31, 2014 | $ 24,266 | $ 7,428,754 | $ (150,849) | $ (1,092,005) | $ 6,210,166 |
Balance, beginning, shares at Dec. 31, 2014 | 23,720,130 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation expense | 117,696 | 117,696 | |||
Issuance of common shares upon exercise of options | $ 93 | 50,496 | 50,589 | ||
Issuance of common shares upon exercise of options, shares | 93,165 | ||||
Repurchase of common shares under Buyback Program | (177,916) | (177,916) | |||
Repurchase of common shares under Buyback Program, shares | (85,808) | ||||
Issuance of common shares to employees | $ 9 | (9) | |||
Issuance of common shares to employees, shares | 9,000 | ||||
Retirement of treasury shares | $ (546) | (150,303) | 150,849 | ||
Net income | 533,917 | 533,917 | |||
Balance, ending at Dec. 31, 2015 | $ 23,822 | 7,446,634 | (177,916) | (558,088) | $ 6,734,452 |
Balance, ending, shares at Dec. 31, 2015 | 23,736,487 | 23,736,487 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation expense | 121,871 | $ 121,871 | |||
Issuance of common shares upon exercise of options | $ 86 | 64,951 | 65,037 | ||
Issuance of common shares upon exercise of options, shares | 86,417 | ||||
Repurchase of common shares under Buyback Program | (346,976) | $ (346,976) | |||
Repurchase of common shares under Buyback Program, shares | (157,127) | 157,127 | |||
Issuance of common shares for remaining interest in Validus | $ 93 | 199,979 | $ 200,072 | ||
Issuance of common shares for remaining interest in Validus, shares | 93,057 | ||||
Acquisition of non-controlling interest in Validus, net of tax effect | 431,088 | 431,088 | |||
Issuance of common shares for 60% interest in SureHarvest | $ 851 | 1,709,362 | 1,710,213 | ||
Issuance of common shares for 60% interest in SureHarvest, shares | 850,852 | ||||
Issuance of common shares for acquisition-related consulting fees | $ 38 | 78,712 | 78,750 | ||
Issuance of common shares for acquisition-related consulting fees, shares | 37,500 | ||||
Net income | 433,171 | 433,171 | |||
Balance, ending at Dec. 31, 2016 | $ 24,890 | $ 10,052,597 | $ (524,892) | $ (124,917) | $ 9,427,678 |
Balance, ending, shares at Dec. 31, 2016 | 24,647,186 | 24,647,186 |
Consolidated Statement of Equi8
Consolidated Statement of Equity (Parenthetical) | Dec. 31, 2016 | Dec. 28, 2016 |
SureHarvest Services LLC [Member] | ||
Percentage of business acquired | 60.00% | 60.00% |
The Company and Basis of Presen
The Company and Basis of Presentation | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company and Basis of Presentation | Note 1 - The Company and Basis of Presentation Business Overview Where Food Comes From, Inc. is a Colorado corporation based in Castle Rock, Colorado (“WFCF”, the “Company,” “our,” “we,” or “us”). We provide verification and certification solutions for the agriculture, livestock and food industry. Most of our customers are located throughout the United States. On September 16, 2013, we acquired a 60% interest in Validus Verification Services LLC (“Validus”) which consisted of the auditing business of Praedium Ventures, LLC (“Praedium”), previously known as Validus Ventures LLC. On February 29, 2016, the Company exercised its call option to acquire the remaining 40% interest in Validus (Note 3). On December 28, 2016, we acquired a 60% interest in SureHarvest Services LLC (“SureHarvest”) which consisted of all the business assets of SureHarvest Inc. (Note 3) We operate in one segment. Basis of Presentation Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from the estimates. Our consolidated financial statements include the accounts of all majority-owned or controlled subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired are included in the consolidated financial statements from the date of the acquisition. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Cash and Cash Equivalents We place our cash with high quality financial institutions. At times, cash balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit; however, we have not experienced any losses related to balances that exceed such FDIC insurance limits, and we believe our credit risk is minimal. At times, we may also invest in short-term investments with original maturities of three months or less, which we consider to be cash and cash equivalents, since they are readily convertible to cash. Short-Term Investments Certificates of deposit with original maturities greater than three months and remaining maturities less than one year are classified as “Short-term investments.” Revenue Recognition We offer a range of products and services to deploy and maintain identification, traceability, and verification systems and to facilitate customers’ participation in and compliance with the USDA’s Quality System Assessment, Process Verification and Export Verification Programs. We generate revenue primarily from the sale of our verification solutions, consulting services and hardware sales. We sell our products and services directly to customers at various levels in the livestock supply chain. Revenue is recognized when persuasive evidence of an agreement with the customer exists, delivery has occurred or services have been provided, the sales price is fixed or determinable, collectability is reasonably assured, and risk of loss and title have transferred to the customer. No single customer generated more than 10% of total net revenue in 2016 or 2015. Service revenues primarily consist of fees charged for verification audits and other verification services that the Company performs for customers. Revenue from verification audits is recognized upon completion of the audits. Contracts for these services are cancelable only for non-performance. In connection with certain arrangements, reimbursable expenses are incurred and billed to customers and such amounts are recognized as both revenue and cost of revenue. Deferred revenue represents payments received in advance from our customers for annual customer support services not yet performed as of December 31st, and revenue is recognized as services are performed, generally over the one-year contract term. Customer deposits represent down-payments made in advance of a verification audit to be performed for a customer. Deposits are initially recorded as current liabilities until services are performed and applied to the customer’s accounts when invoiced. Revenues under contracts for consulting services are recognized when completed (for short-term projects). On occasion, we may enter into long-term projects, for which we use the percentage of completion method. No such long-term projects occurred during 2016 and 2015. Product sales are primarily generated from the sale of cattle identification ear tags. Revenue is recognized when goods are shipped and after title has transferred to the customer. Other revenue primarily represents the fees earned from our “WhereFoodComesFrom®” labeling program. Revenue is recognized when our customer, who has been granted a right to use our WhereFoodComesFrom® label, places this label on their product and ships their product. Revenue is billed based on pounds of product shipped. Generally, we do not provide right of return or warranty on product sales or services performed. Accounts Receivable and Allowance for Doubtful Accounts Our receivables are generally due from trade customers. Credit is extended based on our evaluation of the customer’s financial condition and generally, collateral is not required. Accounts receivable are generally due approximately 30 days from the invoice date and are stated at amounts due from customers, net of an allowance for doubtful accounts. Accounts receivable that are outstanding longer than the contractual payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss and payment history, the customer’s current ability to pay its obligations to us and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The allowance for doubtful accounts was approximately $17,900 and $18,100, at December 31, 2016 and 2015, respectively. No single customer accounted for greater than 10% of our accounts receivable balances at December 31, 2016 and 2015. Cost of Revenues Cost of revenues includes the cost of products sold, which consists of livestock ear tags generally used in connection with our verification programs. Salaries and related fringe benefits directly associated with our verification services are allocated to cost of revenues. Livestock identification ear tags sold in connection with our verification offerings are purchased primarily from one supplier. However, there are numerous other companies which manufacture and market such ear tags. Fair Value Measurements ASC Topic 820, Fair Value Measurements and Disclosure, establishes a hierarchy for inputs used in measuring fair value for financial assets and liabilities that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows: ● Level 1: Quoted prices available in active markets for identical assets or liabilities; ● Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; ● Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash or valuation models. The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The Company’s non-recurring fair value measurements include purchase price allocations for the fair value of assets and liabilities acquired through business combinations. Please refer to Note 3 for further discussion of business combinations. The acquisition of a group of assets in a business combination transaction requires fair value estimates for assets acquired and liabilities assumed. The fair value of assets and liabilities acquired through business combinations is calculated using a discounted future cash flows method. The discounted cash flows are developed using the income approach in which a value (based on management’s expectations for the future) is determined by converting anticipated benefits. The fair value measurements are based on significant inputs not observable in the market and thus represent fair value measurements which are designated as Level 3 inputs within the fair value hierarchy. Key assumptions and considerations include: a) A discount rate range of 19-22 percent; b) Terminal value based on long-term sustainable growth rates of 3 percent; c) Financial data of comparable companies for market participant assumptions; and d) Consideration of the marketability that market participants would consider when measuring the fair value of non-controlling interest in our acquisition. Other Financial Instruments The carrying value of cash and restricted cash, accounts receivable, and accounts payable approximate their fair value due to their short maturities. The carrying values shown for short-term investments, debt and notes payable also approximate fair value because current interest rates and terms offered to us for similar instruments are substantially the same (Level 2 inputs). Property and Equipment Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets. Land is not depreciated. Buildings are depreciated over 20 years. Leasehold improvements are amortized over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful lives of the assets. All other property and equipment have depreciable lives which range from two to seven years. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and the related gain or loss is reflected in earnings. Impairment of Long-Lived Assets We review all of our long-lived assets (including intangible assets) for impairment at least annually or whenever impairment indicators are determined to be present. If an impairment exists, the amount of impairment is measured as the excess of the carrying amount of the asset over its fair value as determined utilizing estimated discounted future cash flows, or some other fair value measure, or the expected proceeds, net of costs to sell, upon sale of the asset. Significant judgments are required to estimate the fair value of intangible assets including estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or impairment at future reporting dates. No impairment was identified on the Company’s long-lived assets through December 31, 2016. Definite Lived Intangible Assets Our definite lived intangible assets consist of customer relationships, accreditations, a beneficial lease arrangement, tradenames/trademarks and patents related to our acquisitions, recorded at estimated fair value. It also consists of our trademark rights and the related costs incurred to obtain the trademark rights recorded at cost. These definite lived assets are subject to amortization using the straight-line method over the estimated useful lives of the respective assets, which range from two to fifteen years. (Note 5). Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as consumer spending habits and general economic trends, and internal factors such as changes in our business strategy and our internal forecasts. We review intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. If our qualitative analysis indicates that there could be an impairment, we then determine whether an impairment loss occurred which requires a comparison of the carrying amount to the sum of the undiscounted cash flows expected to be generated by the asset, or the expected proceeds, net of costs to sell, upon sale of the asset. If an impairment exists, the amount of impairment is measured as the excess of the carrying amount of the asset over its fair value. During 2015 and 2016, we completed a qualitative analysis, and based upon the work performed, we concluded that no impairment existed. Goodwill and Other Non-Amortizable Intangible Assets Goodwill relates to our acquisitions of ICS, Validus and SureHarvest. All other non-amortizable intangible assets relate to the trademarks/tradenames acquired in the Validus acquisition and have an indefinite life. Pursuant to ASC Topic 350, if an intangible asset is determined to have an indefinite useful life, it shall not be amortized until its useful life is determined to no longer be indefinite. Accordingly, we evaluate the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events or circumstances continue to support an indefinite useful life. As of December 31, 2016, there have been no changes to the indefinite life determination pertaining to these intangible assets. In addition, an intangible asset that is not subject to amortization shall be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss equal to the excess is recorded. However, entities testing an indefinite-lived intangible asset for impairment have the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of qualitative factors, that the likelihood of the indefinite-lived intangible asset being impaired is below a “more-likely-than-not” threshold (i.e., a likelihood of more than 50 percent), the entity would not need to calculate the fair value of the asset. During the fourth quarter, we assessed the carrying value of goodwill and other intangible assets of each of ICS, Validus and SureHarvest, our three reporting units. At December 31, 2016, goodwill assigned to ICS, Validus and SureHarvest was approximately $533,000, $746,800, and $1,372,500 respectively. We performed a qualitative assessment on our ICS and Validus reporting units for our 2016 annual test and concluded that it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value and, therefore, a two-step impairment test was not necessary. The qualitative assessment compares current performance, expectations and other indicators against what was expected as part of the most recent Step 1 valuation. Consequently, the key estimates and assumptions related to the most recent Step 1 valuation pertaining to this reporting unit had not changed since our previous annual report. With respect to our SureHarvest reporting unit, fair value for goodwill and other intangibles assets is discussed in detail in Note 3 to the Consolidated Financial Statements. Research and Development and Software Development Costs Research and development costs are charged to operations as incurred. We did not incur any research and development expense in 2016 and 2015. Internal use software development costs represent the capitalization of certain external and internal computer software costs incurred during the application development stage. The application development stage is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Website software development costs related to certain planning and training costs incurred in the development of website software are expensed as incurred, while application development stage costs are capitalized. In 2013, we acquired certain assets of Validus, which included internally-developed software with an estimated fair value of $129,000. During 2016 and 2015, the amortization of capitalized costs totaled approximately $43,000 each year, included in depreciation expense (Note 4). Capitalized costs are included in property and equipment. Software development costs for external sale are capitalized once technological feasibility is achieved. Capitalized costs are amortized over the expected benefit period. We generally expense a significant portion of software development costs because technological feasibility occurs very late in the software development process. In connection with our SureHarvest acquisition on December 28, 2016, software developed for external sale with an estimated fair value of approximately $558,000 has been included in property and equipment (Note 3). Advertising Expenses Advertising costs are expensed as incurred. Total advertising expense for the years ended December 31, 2016 and 2015, were approximately $79,400 and $31,600, respectively. Income Taxes We record income taxes under the asset and liability method. Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect when we realize the underlying items of income and expense. We consider all relevant factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income and the carryforward periods available to us for tax reporting purposes, as well as assessing available tax planning strategies. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates. We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we expect to take in a future tax return. The determination for required liabilities is based upon an analysis of each individual tax position, taking into consideration whether it is more likely than not that our tax position, based on technical merits, will be sustained upon examination. For those positions for which we conclude it is more likely than not it will be sustained, we recognize the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the taxing authority. The difference between the amount recognized and the total tax position is recorded as a liability. The ultimate resolution of these tax positions may be greater or less than the liabilities recorded. Management believes there are no current uncertain tax positions that would result in an asset or liability being recognized in the accompanying financial statements. We file income tax returns in the US federal jurisdiction and various state jurisdictions. We are no longer subject to US federal tax examination for years beginning before January 1, 2013, and the state tax returns that remain subject to examination include those for the years ended December 31, 2012 through the years ended December 31, 2016. Stock-Based Compensation The Company recognizes all equity-based compensation as stock-based compensation expense based on the fair value of the compensation measured at the grant date. For stock options, fair value is calculated using the Black-Scholes-Merton option pricing model. For restricted stock awards, fair value is the closing stock price for the Company’s common stock on the grant date. The expense is recognized over the vesting period of the grant. See Note 9 for additional information. Deferred Rent and Lease Incentives For leases that contain fixed escalations of the minimum annual lease payment during the original term of the lease, we recognize rental expense on a straight-line basis over the lease term and record the difference between rent expense and the amount currently payable as deferred rent. Deferred lease incentives include construction allowances received from landlords, which are amortized on a straight-line basis over the lease term. Recently Adopted Accounting Standards Going Concern In August 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40)”, which requires an entity’s management to evaluate, for each reporting period, including interim periods, of whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued. Additional disclosures are required if management concludes that conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The new guidance was effective for the Company in the fourth quarter of 2016. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows. Measurement Period Adjustments In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805)”, which simplify the accounting for measurement period adjustments by eliminating the requirements to restate prior period financial statements for these adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The new standard, which should be applied prospectively to measurement period adjustments that occur after the effective date, was effective for the Company in the first quarter of 2016. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows. Stock-Based Compensation In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Stock Compensation. The objective of this amendment is part of the FASB’s Simplification Initiative as it applies to several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company elected early adoption of ASU 2016-09 in the in the fourth quarter of 2016 which required us to reflect any adjustments as of January 1, 2016. Upon adoption, excess tax benefits or deficiencies from share-based award activity are reflected in the consolidated statements of operations as a component of the provision for income taxes, whereas they previously were recognized in equity. The adoption resulted in approximately $14,900 income tax benefit recognized as of December 31, 2016. The previously unrecognized excess tax benefit of approximately $13,700 as of January 1, 2016 was recorded as an increase to deferred tax asset. The Company did not change its policy with respect to the treatment of forfeitures; and, the Company continues estimating the number of forfeitures. As such, this has no cumulative effect on retained earnings upon adoption. With the early adoption of 2016-09, the Company has elected to present the cash flow statement on a prospective transition method where no prior periods have been adjusted. Recently Issued Accounting Standards Lease Accounting In February 2016, the FASB issued ASU 2016-02, “Leases”, which will require lessees to recognize a right-of-use asset and a lease liability for all leases that are not short-term in nature. For a lessor, the accounting applied is also largely unchanged from previous guidance. The new rules will be effective for the Company in the first quarter of 2019. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations and cash flows. Although the evaluation is ongoing, the Company expects that the adoption will impact the Company’s financial statements as the standard requires the recognition on the balance sheet of a right of use asset and corresponding lease liability. The Company is currently analyzing its contracts to determine whether they contain a lease under the revised guidance and has not quantified the amount of the asset and liability that will be recognized on the Company’s balance sheet. Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes current revenue recognition requirements and industry-specific guidance. The codification was amended through additional ASUs and, as amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company is required to adopt the new standard in 2018 and may adopt either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption using one of two retrospective application methods. The Company is continuing to evaluate the provisions of this new guidance and has not determined the impact this standard may have on its financial condition, results of operations, cash flows and related disclosures or decided upon the method of adoption. We have considered all other recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our consolidated financial statements. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. Net income and shareholders’ equity were not affected by these reclassifications. |
Business Acquisitions
Business Acquisitions | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Business Acquisitions | Note 3 – Business Acquisitions Validus Acquisition On September 16, 2013, we entered into an Asset Purchase and Contribution Agreement (the “Purchase Agreement”), by and among the Company, Validus, and Praedium. In connection with this transaction, Praedium was issued a 40% interest in Validus, with the Company holding a 60% interest. The Company had the first right of refusal on the remaining 40% of the outstanding stock and a call option to acquire the remaining 40% interest. Effective February 29, 2016, the Company exercised its call option to purchase the remaining 40% interest of Validus in exchange for cash consideration of approximately $162,700, and 93,057 shares of common stock valued at approximately $200,100, pursuant to the Purchase Agreement, dated September 16, 2013. The carrying amount of the contingently redeemable non-controlling interest was adjusted to $0 to reflect the change in the Company’s ownership interest up to 100%. The difference between the fair value of the consideration paid and the carrying value of the non-controlling interest on the date of the transaction, which totaled approximately $542,000, net of taxes of $110,900, was adjusted to equity. SureHarvest Acquisition On December 28, 2016, we entered into an Asset Purchase Agreement (the “SureHarvest Purchase Agreement”), by and among the Company, SureHarvest Services LLC (the “Buyer” or “SureHarvest”); and SureHarvest, Inc., a California corporation (“SureHarvest, Inc.”). We acquired substantially all the assets of the Seller. SureHarvest develops software and provides services related to sustainability measurement and benchmarking, traceability, verification and certification to the food and agriculture industries. Pursuant to the SureHarvest Purchase Agreement, WFCF purchased 60% of the business assets of SureHarvest, Inc. in exchange for total consideration of approximately $2.8 million, comprised of approximately $1,122,000 in cash and 850,852 shares of common stock of WFCF valued at approximately $1,710,000 based on the closing price of our stock on December 28, 2016, of $2.01 per share. The consideration paid by WFCF in connection with this acquisition was determined by arms-length negotiations between WFCF and SureHarvest, Inc. The transaction was financed through cash on hand. The Purchase Agreement provides for a period of eighteen months to support any indemnification claims for breach of SureHarvest, Inc. representations, warranties and covenants. The Shares were placed in escrow during such indemnification period. The Purchase Agreement also includes non-dilution provisions. SureHarvest, Inc. made certain additional customary covenants, including not soliciting or initiating discussions, engaging in negotiations or providing any non-public information concerning alternative business combination transactions with respect to the transaction and covenants not to compete. The Company has the right of first refusal on the remaining 40% membership interest of SureHarvest. At any time following the thirty-six-month anniversary of the effective date of the Purchase Agreement, the Company shall have the option, but not the obligation, to purchase all the units (the 40% interest) of SureHarvest held by the Seller, and the Seller shall have the option, but not the obligation, to require the Company to purchase all the units of SureHarvest held by the Seller. The purchase price for the units shall be equal to the amount the selling holders of the units would be entitled to receive upon a liquidation of the SureHarvest assuming all of the assets of SureHarvest are sold for a purchase price equal to the product of eight and half times trailing twelve-month earnings before income taxes, depreciation and amortization, as defined, subject to an $8 million floor. Because SureHarvest, Inc. at its option, can require the Company to purchase its 40% interest in SureHarvest, the SureHarvest non-controlling interest meets the definition of a contingently redeemable non-controlling interest. Redeemable non-controlling interests are presented at the greater of their carrying amount or redemption value at the end of each reporting period and are shown as a separate caption between liabilities and equity (mezzanine section) in the accompanying balance sheet. The purchase price allocation is preliminary and subject to change, as an analysis has not been completed as of the date of this report. We are still reviewing all of the underlying assumptions and calculations used in the allocation. However, the table below summarizes the provisional estimated fair values assigned to the assets and liabilities acquired in addition to the excess of the purchase price over the net assets acquired: Dec. 28, 2016 Accounts receivable 290,692 Property and equipment 572,620 Accounts payable and accrued expenses (138,562 ) Indentifiable intangible assets 2,623,100 Excess attributable to goodwill 1,372,488 Total fair value 4,720,338 Fair value of non-controlling interest (1,888,135 ) Total consideration $ 2,832,203 On the acquisition date, the provisional fair value of the non-controlling interest was estimated to be $1,888,135. This amount was based upon the gross consideration that would have been paid assuming 100% of the outstanding stock had been acquired. Excess attributable to goodwill reflects the excess over the identifiable intangible assets acquired based on the preliminary provisional allocation of the purchase price. Goodwill is primarily attributable to the operational and financial benefits expected to be realized from the acquisition, including cost saving synergies from operating efficiencies, future growth in bundling opportunities across divisions and brands, realized savings from a more sophisticated information technology infrastructure, and strategic advances from expansion of our intellectual property. The provisional amounts of the components of intangible assets have been estimated as follows: Dec. 28, 2016 Indentifiable intangible assets and goodwill: Trademarks $ 218,000 Patents 970,100 Customer relationships 1,435,000 Goodwill 1,372,488 Total intangible assets and goodwill $ 3,995,588 Estimated provisional amortization expense related to such intangible assets was not considered material for the period from December 28, 2016 (the acquisition date) through December 31, 2016. The useful lives for intangible assets are expected to be between 3 and 15 years. The following unaudited pro forma information presents the results of operations for the year ended December 31, 2016 and 2015, as if the acquisition of SureHarvest had occurred on January 1, 2016 and 2015. This pro forma information does not reflect any integration activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that could result from the acquisition, nor does it purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what such results would be for any future periods. Unaudited 2016 2015 Total revenue $ 13,292,825 $ 11,771,317 Net income attributable to Where Food Comes From, Inc. $ 275,553 $ 292,830 Basic and diluted earnings per share $ 0.01 $ 0.01 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 4 - Property and Equipment The major categories of property and equipment are as follows as of December 31st: 2016 2015 Automobiles $ 76,676 $ 47,397 Furniture and office equipment 203,797 139,918 Software and tools 952,081 375,257 Website development and other enhancements 183,385 183,385 Building and leasehold improvements 476,274 50,747 Land 2,436 2,436 1,894,649 799,140 Less accumulated depreciation 665,299 641,190 Property and equipment, net $ 1,229,350 $ 157,950 Depreciation expense for the years ended December 31, 2016 and 2015, was approximately $112,600 and $100,200, respectively. |
Intangible and Other Assets
Intangible and Other Assets | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible and Other Assets | Note 5 – Intangible and Other Assets The following table summarizes our intangible assets as of December 31st: Estimated 2016 2015 Useful life Intangible assets subject to amortization: Tradenames and Trademarks $ 282,307 $ 64,307 2.5 - 8.0 years Accreditations 88,663 88,663 5.0 years Customer Relationships 2,836,330 1,401,330 8.0 - 15.0 years Beneficial Lease Arrangement 120,200 120,200 11.0 years Patents 970,100 — 4.0 years 4,297,600 1,674,500 Less accumulated amortization 547,917 392,846 3,749,683 1,281,654 Tradenames/trademarks (not subject to amortization) 465,000 465,000 4,214,683 1,746,654 Deposit 13,545 13,545 $ 4,228,228 $ 1,760,199 At December 31, 2016 and 2015, the deposit represents funds deposited with a property management company related to the Castle Rock corporate office. The funds will be released at the end of the term of the lease agreement. Amortization expense for the years ended December 31, 2016 and 2015, was approximately $155,100 and $156,000, respectively. Future scheduled amortization of intangible assets is as follows: Fiscal year ending December 31: 2017 $ 519,759 2018 $ 514,473 2019 $ 503,848 2020 $ 482,035 2021 $ 235,414 Thereafter 1,494,154 $ 3,749,683 |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | Note 6 - Notes Payable Equipment Note December 31, 2016 2015 Equipment Note Payable $ — $ 16,211 Less current portion of notes payable and other long-term debt — 7,846 Notes payable and other long-term debt $ — $ 8,365 In 2012, we purchased a vehicle and entered into a note payable for $37,407 with interest and principal payments due in equal monthly installments of $715 over five years beginning January 2013. This note bears an interest rate of 5.5% per annum and is collateralized by the vehicle. During the quarter ended September 30, 2016, the Company paid the note in full upon trade-in of the vehicle. The new vehicle was paid for in cash. Unison Revolving Line of Credit The Company has a revolving line of credit (LOC) agreement which matures April 1, 2017. The LOC provides for $70,050 in working capital. The interest rate is at the New York prime rate plus 2.25% and is adjusted daily. Principal and interest are payable upon demand, but if demand is not made, then annual payments of accrued interest only are due, with the principal balance due on maturity. As of December 31, 2016, the effective interest rate was 6.0%. The LOC is collateralized by all the business assets of ICS. As of December 31, 2016, there were no amounts outstanding under this LOC. Capital Lease The Company had a capital lease for certain office equipment with a base rent of $405 per month. This 63-month lease was due to expire in April 2017. Approximately $22,300 in asset cost was included in property and equipment and is being amortized over 63 months. Imputed interest of 5.25% was used in determining the minimum lease payments. During the second quarter 2016, the Company traded in the office equipment under a new capital lease agreement. The new lease expires in July 2021. Approximately $22,400 in asset cost was included in property and equipment and is being amortized over the lease term of 63 months. Imputed interest of 3.33% was used in determining the minimum lease payments. Future minimum lease payments for capital leases are as follows: Years Ending December 31st, Amount 2017 $ 4,664 2018 4,664 2019 4,664 2020 4,664 2021 2,723 Thereafter — Future minimum lease payments 21,379 Less amount representing interest (1,577 ) Present value of net minimum lease payments 19,802 Less current portion (4,067 ) Capital lease obligations $ 15,735 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7 - Income Taxes The provision for income taxes consists of the following: December 31, 2016 2015 Current income tax expense: Federal $ 63,586 $ — State 1,967 — Total current income tax expense 65,553 — Deferred income tax expense: Federal 164,894 289,205 State 5,100 8,945 Total deferred income tax expense 169,994 298,150 Total income tax expense $ 235,547 $ 298,150 The reconciliation of income taxes calculated at the statutory rates to our effective tax rate is as follows: December 31, 2016 2015 Expected tax expense $ 216,618 $ 270,102 State tax provision, net 18,812 26,656 Permanent differences (3,419 ) 13,278 Business tax credit applied — (33,408 ) Other, net 3,536 21,522 Income tax expense $ 235,547 $ 298,150 The income tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) as of December 31, 2016 and 2015 are as follows: December 31, 2016 2015 Deferred tax assets (liabilities): Net operating loss carryforwards $ — $ 296,543 Accruals, stock based compensation and other 134,298 11,149 Property and equipment (107,189 ) (3,123 ) Intangibles assets (76,549 ) (81,666 ) Charitable contributions — 8,549 Net deferred tax assets (liabilities) (49,440 ) 231,452 At December 31, 2015, we had net operating loss carryforwards of $801,500 which begin to expire in 2026. Our net operating loss carryforwards were fully utilized against taxable income for the year ended December 31, 2016. |
Stock Buyback Plan
Stock Buyback Plan | 12 Months Ended |
Dec. 31, 2016 | |
Stock Buyback Plan | |
Stock Buyback Plan | Note 8 – Stock Buyback Plan On January 7, 2008, we announced our intention to buy back up to one million shares of our common stock from the open market at the quoted market price on the date of repurchase. Activity under the Stock Buyback Plan by are as follows: Number of Shares Cost of Shares Average Cost per Share Shares purchased prior to 2015 546,697 $ 150,849 $ 0.28 Retirement of shares purchased (546,697 ) $ (150,849 ) $ 0.28 Shares purchased during 2015 85,808 $ 177,916 $ 2.07 Shares purchased during 2016 157,127 346,976 $ 2.21 Total 242,935 $ 524,892 $ 2.16 The repurchased shares are recorded as part of treasury stock and are accounted for under the cost method. Our Stock Buyback Plan has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. In the future, we may consider additional share repurchases under our plan based on seral factors, including our cash position, share price, operational liquidity, and planned investment and financing needs. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Note 9 – Stock-Based Compensation In addition to cash compensation, the Company may compensate certain service providers, including employees, directors, consultants, and other advisors, with equity based compensation in the form of stock options and restricted stock awards. The Company records an expense related to equity compensation by pro-rating the estimated grant date fair value of each grant over the period of time that the recipient is required to provide services to the Company (the “vesting phase”). The calculation of fair value is based, either directly or indirectly, on the quoted market value of the Company’s common stock. Indirect valuations are calculated using the Black-Scholes-Merton option pricing model. For the periods presented, all stock-based compensation expense was classified as a component within selling, general and administrative expense in the Company’s statements of income. The amount of stock-based compensation expense is as follows: 2016 2015 Stock options $ 34,620 $ 68,350 Restricted stock awards 87,251 49,346 Total $ 121,871 $ 117,696 As of December 31, 2016, the estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows: Years ended December 31st: Unvested stock options Unvested Total 2017 $ 58,814 $ 118,043 $ 176,857 2018 58,695 81,001 139,696 2019 53,552 25,046 78,598 $ 171,061 $ 224,090 $ 395,151 The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions: 2016 2015 Number of options awarded to purchase common shares 94,000 shares — Risk free interest rate 1.90% — Expected volatility 163.7% — Assumed dividend yield 0% — Expected life of options from the date of grant 9.8 years — Equity Incentive Plans Our 2006 Equity Incentive Plan (the “2006 Plan”) and 2016 Equity Incentive Plan (the “2016 Plan,” and together with the 2006 Plan, the “Plans”) provide for the issuance of stock-based awards to employees, officers, directors and consultants. The Plans permit the granting of stock awards and stock options. The vesting of stock-based awards is generally subject to the passage of time and continued employment through the vesting period. Our 2006 Plan provided for the issuance of a maximum of 3,000,000 shares of our common stock. The 2006 Plan terminated in September 2016. As of December 31, 2016, the 2006 Plan had 282,086 awards outstanding. Our 2016 Plan was ratified by our shareholders in May 2016 and provides for the issuance of a maximum of 5,000,000 shares of our common stock, of which 4,873,000 shares were still available for issuance as of December 31, 2016. Stock Option Activity The Company generally grants stock options to persons directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the stock option grants are set forth in the award agreements. Each stock option grant represents one share of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over one to three years. Stock option activity during 2016 and 2015 is summarized as follows: Weighted Avg. Weighted Avg. Weighted Avg. Remaining Number of Exercise Price Fair Value Contractual Life Aggregate Awards per Share per Share (in years) Intrinsic Value Outstanding, January 1, 2015 359,168 $ 0.76 $ 0.71 6.58 $ 768,869 Granted — $ — $ — — Exercised (93,165 ) $ 0.54 $ 0.33 3.49 Expired/Forfeited — $ — $ — — Outstanding, December 31, 2015 266,003 $ 0.84 $ 0.85 6.43 $ 416,278 Granted 94,000 $ 1.89 $ 1.87 9.96 Exercised (86,417 ) $ 0.75 $ 0.76 5.22 Expired/Forfeited — $ 0.93 $ 1.97 3.63 Outstanding, December 31, 2016 273,586 $ 1.22 $ 1.22 7.05 $ 217,892 Exercisable, December 31, 2016 172,331 $ 0.83 $ 0.85 5.46 $ 204,438 Unvested, December 31, 2016 101,255 $ 1.89 $ 1.87 9.75 $ 13,454 The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of our common stock on December 31, 2016 and the exercise price for in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on December 31, 2016. During the year ended December 31, 2015, no stock-based awards were forfeited. During the year ended December 31, 2016, a total of 500 options issued under the 2006 Plan were forfeited, all of which were unvested. The options were forfeited upon the employees’ termination from the Company. Restricted Stock Activity The Company grants shares of restricted stock to directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the awards are set forth in the award agreements. Each share of restricted stock represents one share of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over one to three years. Shares of restricted stock are valued at the closing price of the Company’s common stock on the grant date and are recognized as selling, general and administrative expense over the vesting period of the award. The following table summarizes activity for restricted stock awards for the fiscal years presented: Weighted Avg Number of Grant Date Options Fair Value Non-vested restricted shares, December 31, 2014 — $ — Granted 83,000 $ 2.68 Vested (9,000 ) $ 3.08 Forfeited — $ — Non-vested restricted shares, December 31, 2015 74,000 $ 2.63 Granted 62,500 $ 2.22 Vested — $ — Forfeited (500 ) $ 2.10 Non-vested restricted shares, December 31, 2016 136,000 $ 2.44 |
Basic and Diluted Net Income pe
Basic and Diluted Net Income per Share | 12 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income per Share | Note 10 - Basic and Diluted Net Income per Share Basic net income per share was computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. The following is a reconciliation of the share data used in the basic and diluted income per share computations: Year ended December 31, 2016 2015 Basic: Weighted average shares outstanding 23,818,762 23,797,236 Diluted: Weighted average shares outstanding 23,818,762 23,797,236 Weighted average effects of dilutive securities 145,264 177,138 Total 23,964,026 23,974,374 Antidilutive securities: 152,168 95,834 The effect of the inclusion of the antidilutive shares would have resulted in an increase in earnings per share. Accordingly, the weighted average shares outstanding have not been adjusted for antidilutive shares. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 11 - Related Party Transactions In 2016 and 2015, we recorded total net revenue of approximately $12,000 and $16,000, respectively, from related parties. The related parties consisted of a business owned by the father of Leann Saunders, our President, and businesses owned by members of our Board of Directors. The Company leases its corporate headquarters from a company in which our CEO and President have a 27% ownership interest (Note 12). U nder the related party arrangement, a |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 12 – Commitments and Contingencies Operating Leases & Lease Incentive Obligation The Company relocated its headquarters within Castle Rock, Colorado, during the third quarter 2016 and entered into a new lease agreement for approximately 8,000 square feet of office space. This space is being leased from a company in which our CEO and President, each a related party to the Company, have a 27% ownership interest. The lease agreement has an initial term of five years plus two renewal periods, which the Company is more likely than not to renew. The office space lease term commenced August 1, 2016. Rental payments are approximately $19,000 per month, which includes common area charges, and provides for escalating rental payments annually over the term of the lease. The Company recognizes rent expense on a straight-line basis over the non-cancelable lease term and option renewal periods. The resulting deferred rent of approximately $21,000 is included in liabilities on the consolidated balance sheet. The Company recorded leasehold improvements of approximately $406,400, which included approximately $163,000 in lease incentives. Leasehold improvements are included in property and equipment on the consolidated balance sheet. Lease incentives have been included in other long-term liabilities and will reduce rent expense on a straight-line basis over 15 years. Lease incentives are excluded from minimum lease payments in the schedule below. In September 2013, the Company entered into a lease agreement for our Urbandale, Iowa office space. The lease is for a period of three years, expired on October 31, 2016, and required rental payments of approximately $2,600 per month. There was no renewal feature. Currently, the space is being leased month-to-month under the same terms as the original agreement. In addition to primary rent, the lease requires additional payments for operating costs and other common area maintenance costs. The Company also owns approximately ¾ acre on which a 2,300 square foot building is located in Medina, North Dakota. The Company leases space in this building under a five-year lease with an expiration date of March 1, 2018. One additional option to renew for a five-year term exists and is deemed to automatically renew unless written notice is provided 60 days before the end of the term. The Company is charged a monthly rental rate of approximately $150 plus all insurance, taxes and other costs based on actual expenses to maintain the building. In connection with our acquisition of SureHarvest, we added two locations in California, Soquel and Modesto. Our office space in Soquel expires on November 30, 2017 and requires rental payments of approximately $2,700 per month. In addition to primary rent, this lease requires additional payments for operating costs and other common area maintenance costs. The monthly rental payments for our leased space in Modesto is approximately $600 and the lease agreement is month-to-month. Rent expense for the years ended December 31, 2016 and 2015, was approximately $204,200 and $121,300, respectively. Future minimum lease payments are as follows: Years ended December 31st: Total 2017 $ 245,098 2018 220,749 2019 227,060 2020 233,871 2021 240,888 Thereafter 2,707,132 Total lease commitments $ 3,874,797 Legal proceedings From time to time, we may become involved in various legal actions, administrative proceedings and claims in the ordinary course of business. We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. Employee Benefit Plan The Company has established a 401(K) plan for the benefit of our employees. The plan covers substantially all of our employees who have attained age 21. We may make a discretionary matching contribution in an amount that is determined by our Board of Directors. If a matching contribution is made, the amount cannot exceed the elective deferral contributions. For the years ended December 31, 2016 and 2015, we made aggregate matching contributions of approximately $45,300 and $26,300, respectively. Redeemable Non-Controlling Interest Redeemable non-controlling interest on our consolidated balance sheets represents the non-controlling interest related to the Validus and SureHarvest acquisitions (see Note 3). Below reflects the activity of the redeemable non-controlling interest as of and for the years ended December 31, 2016 and 2015. Balance, January 1, 2015 $ 974,019 Net loss attributable to non-controlling interest in Validus for the year ended December 31, 2015 (37,649 ) Balance, December 31, 2015 936,370 Net loss attributable to non-controlling interest in Validus for the year to date period ended February 29, 2016 (31,605 ) Acquisition of non-controlling interest in Validus on March 1, 2016 Cash paid (162,707 ) Fair market value of stock (200,072 ) Adjustment to additional paid-in-capital (541,986 ) Fair value of non-controlling interest in SureHarvest on December 28, 2016 1,888,135 Balance, December 31, 2016 $ 1,888,135 |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 12 Months Ended |
Dec. 31, 2016 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | Note 13 – Supplemental Cash Flow Information Year to date ended December 31, 2016 2015 Cash paid during the year: Interest expense $ 1,517 $ 1,585 Income taxes $ — $ — Non-cash investing and financing activities: Common stock issued for remaining interest in Validus Verification Services LLC $ 200,072 $ — Common stock issued for 60% interest in SureHarvest Services LLC $ 1,710,213 $ — Equipment acquired under capital lease $ 22,439 $ — Lease Incentive Obligation $ 162,540 $ — |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Cash and Cash Equivalents | Cash and Cash Equivalents We place our cash with high quality financial institutions. At times, cash balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit; however, we have not experienced any losses related to balances that exceed such FDIC insurance limits, and we believe our credit risk is minimal. At times, we may also invest in short-term investments with original maturities of three months or less, which we consider to be cash and cash equivalents, since they are readily convertible to cash. |
Short-Term Investments | Short-Term Investments Certificates of deposit with original maturities greater than three months and remaining maturities less than one year are classified as “Short-term investments.” |
Revenue Recognition | Revenue Recognition We offer a range of products and services to deploy and maintain identification, traceability, and verification systems and to facilitate customers’ participation in and compliance with the USDA’s Quality System Assessment, Process Verification and Export Verification Programs. We generate revenue primarily from the sale of our verification solutions, consulting services and hardware sales. We sell our products and services directly to customers at various levels in the livestock supply chain. Revenue is recognized when persuasive evidence of an agreement with the customer exists, delivery has occurred or services have been provided, the sales price is fixed or determinable, collectability is reasonably assured, and risk of loss and title have transferred to the customer. No single customer generated more than 10% of total net revenue in 2016 or 2015. Service revenues primarily consist of fees charged for verification audits and other verification services that the Company performs for customers. Revenue from verification audits is recognized upon completion of the audits. Contracts for these services are cancelable only for non-performance. In connection with certain arrangements, reimbursable expenses are incurred and billed to customers and such amounts are recognized as both revenue and cost of revenue. Deferred revenue represents payments received in advance from our customers for annual customer support services not yet performed as of December 31st, and revenue is recognized as services are performed, generally over the one-year contract term. Customer deposits represent down-payments made in advance of a verification audit to be performed for a customer. Deposits are initially recorded as current liabilities until services are performed and applied to the customer’s accounts when invoiced. Revenues under contracts for consulting services are recognized when completed (for short-term projects). On occasion, we may enter into long-term projects, for which we use the percentage of completion method. No such long-term projects occurred during 2016 and 2015. Product sales are primarily generated from the sale of cattle identification ear tags. Revenue is recognized when goods are shipped and after title has transferred to the customer. Other revenue primarily represents the fees earned from our “WhereFoodComesFrom®” labeling program. Revenue is recognized when our customer, who has been granted a right to use our WhereFoodComesFrom® label, places this label on their product and ships their product. Revenue is billed based on pounds of product shipped. Generally, we do not provide right of return or warranty on product sales or services performed. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Our receivables are generally due from trade customers. Credit is extended based on our evaluation of the customer’s financial condition and generally, collateral is not required. Accounts receivable are generally due approximately 30 days from the invoice date and are stated at amounts due from customers, net of an allowance for doubtful accounts. Accounts receivable that are outstanding longer than the contractual payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss and payment history, the customer’s current ability to pay its obligations to us and the condition of the general economy and the industry as a whole. We write off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The allowance for doubtful accounts was approximately $17,900 and $18,100, at December 31, 2016 and 2015, respectively. No single customer accounted for greater than 10% of our accounts receivable balances at December 31, 2016 and 2015. |
Cost of Revenues | Cost of Revenues Cost of revenues includes the cost of products sold, which consists of livestock ear tags generally used in connection with our verification programs. Salaries and related fringe benefits directly associated with our verification services are allocated to cost of revenues. Livestock identification ear tags sold in connection with our verification offerings are purchased primarily from one supplier. However, there are numerous other companies which manufacture and market such ear tags. |
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurements and Disclosure, establishes a hierarchy for inputs used in measuring fair value for financial assets and liabilities that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows: ● Level 1: Quoted prices available in active markets for identical assets or liabilities; ● Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; ● Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash or valuation models. The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The Company’s non-recurring fair value measurements include purchase price allocations for the fair value of assets and liabilities acquired through business combinations. Please refer to Note 3 for further discussion of business combinations. The acquisition of a group of assets in a business combination transaction requires fair value estimates for assets acquired and liabilities assumed. The fair value of assets and liabilities acquired through business combinations is calculated using a discounted future cash flows method. The discounted cash flows are developed using the income approach in which a value (based on management’s expectations for the future) is determined by converting anticipated benefits. The fair value measurements are based on significant inputs not observable in the market and thus represent fair value measurements which are designated as Level 3 inputs within the fair value hierarchy. Key assumptions and considerations include: a) A discount rate range of 19-22 percent; b) Terminal value based on long-term sustainable growth rates of 3 percent; c) Financial data of comparable companies for market participant assumptions; and d) Consideration of the marketability that market participants would consider when measuring the fair value of non-controlling interest in our acquisition. Other Financial Instruments The carrying value of cash and restricted cash, accounts receivable, and accounts payable approximate their fair value due to their short maturities. The carrying values shown for short-term investments, debt and notes payable also approximate fair value because current interest rates and terms offered to us for similar instruments are substantially the same (Level 2 inputs). |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets. Land is not depreciated. Buildings are depreciated over 20 years. Leasehold improvements are amortized over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful lives of the assets. All other property and equipment have depreciable lives which range from two to seven years. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and the related gain or loss is reflected in earnings. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets We review all of our long-lived assets (including intangible assets) for impairment at least annually or whenever impairment indicators are determined to be present. If an impairment exists, the amount of impairment is measured as the excess of the carrying amount of the asset over its fair value as determined utilizing estimated discounted future cash flows, or some other fair value measure, or the expected proceeds, net of costs to sell, upon sale of the asset. Significant judgments are required to estimate the fair value of intangible assets including estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or impairment at future reporting dates. No impairment was identified on the Company’s long-lived assets through December 31, 2016. |
Definite Lived Intangible Assets | Definite Lived Intangible Assets Our definite lived intangible assets consist of customer relationships, accreditations, a beneficial lease arrangement, tradenames/trademarks and patents related to our acquisitions, recorded at estimated fair value. It also consists of our trademark rights and the related costs incurred to obtain the trademark rights recorded at cost. These definite lived assets are subject to amortization using the straight-line method over the estimated useful lives of the respective assets, which range from two to fifteen years. (Note 5). Assumptions and estimates about future values and remaining useful lives of our intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as consumer spending habits and general economic trends, and internal factors such as changes in our business strategy and our internal forecasts. We review intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. If our qualitative analysis indicates that there could be an impairment, we then determine whether an impairment loss occurred which requires a comparison of the carrying amount to the sum of the undiscounted cash flows expected to be generated by the asset, or the expected proceeds, net of costs to sell, upon sale of the asset. If an impairment exists, the amount of impairment is measured as the excess of the carrying amount of the asset over its fair value. During 2015 and 2016, we completed a qualitative analysis, and based upon the work performed, we concluded that no impairment existed. |
Goodwill and Other Non-Amortizable Intangible Asset | Goodwill and Other Non-Amortizable Intangible Assets Goodwill relates to our acquisitions of ICS, Validus and SureHarvest. All other non-amortizable intangible assets relate to the trademarks/tradenames acquired in the Validus acquisition and have an indefinite life. Pursuant to ASC Topic 350, if an intangible asset is determined to have an indefinite useful life, it shall not be amortized until its useful life is determined to no longer be indefinite. Accordingly, we evaluate the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events or circumstances continue to support an indefinite useful life. As of December 31, 2016, there have been no changes to the indefinite life determination pertaining to these intangible assets. In addition, an intangible asset that is not subject to amortization shall be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss equal to the excess is recorded. However, entities testing an indefinite-lived intangible asset for impairment have the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of qualitative factors, that the likelihood of the indefinite-lived intangible asset being impaired is below a “more-likely-than-not” threshold (i.e., a likelihood of more than 50 percent), the entity would not need to calculate the fair value of the asset. During the fourth quarter, we assessed the carrying value of goodwill and other intangible assets of each of ICS, Validus and SureHarvest, our three reporting units. At December 31, 2016, goodwill assigned to ICS, Validus and SureHarvest was approximately $533,000, $746,800, and $1,372,500 respectively. We performed a qualitative assessment on our ICS and Validus reporting units for our 2016 annual test and concluded that it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value and, therefore, a two-step impairment test was not necessary. The qualitative assessment compares current performance, expectations and other indicators against what was expected as part of the most recent Step 1 valuation. Consequently, the key estimates and assumptions related to the most recent Step 1 valuation pertaining to this reporting unit had not changed since our previous annual report. With respect to our SureHarvest reporting unit, fair value for goodwill and other intangibles assets is discussed in detail in Note 3 to the Consolidated Financial Statements. |
Research and Development and Software Development Costs | Research and Development and Software Development Costs Research and development costs are charged to operations as incurred. We did not incur any research and development expense in 2016 and 2015. Internal use software development costs represent the capitalization of certain external and internal computer software costs incurred during the application development stage. The application development stage is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Website software development costs related to certain planning and training costs incurred in the development of website software are expensed as incurred, while application development stage costs are capitalized. In 2013, we acquired certain assets of Validus, which included internally-developed software with an estimated fair value of $129,000. During 2016 and 2015, the amortization of capitalized costs totaled approximately $43,000 each year, included in depreciation expense (Note 4). Capitalized costs are included in property and equipment. Software development costs for external sale are capitalized once technological feasibility is achieved. Capitalized costs are amortized over the expected benefit period. We generally expense a significant portion of software development costs because technological feasibility occurs very late in the software development process. In connection with our SureHarvest acquisition on December 28, 2016, software developed for external sale with an estimated fair value of approximately $558,000 has been included in property and equipment (Note 3). |
Advertising Expenses | Advertising Expenses Advertising costs are expensed as incurred. Total advertising expense for the years ended December 31, 2016 and 2015, were approximately $79,400 and $31,600, respectively. |
Income Taxes | Income Taxes We record income taxes under the asset and liability method. Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect when we realize the underlying items of income and expense. We consider all relevant factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income and the carryforward periods available to us for tax reporting purposes, as well as assessing available tax planning strategies. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates. We record liabilities to address uncertain tax positions we have taken in previously filed tax returns or that we expect to take in a future tax return. The determination for required liabilities is based upon an analysis of each individual tax position, taking into consideration whether it is more likely than not that our tax position, based on technical merits, will be sustained upon examination. For those positions for which we conclude it is more likely than not it will be sustained, we recognize the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the taxing authority. The difference between the amount recognized and the total tax position is recorded as a liability. The ultimate resolution of these tax positions may be greater or less than the liabilities recorded. Management believes there are no current uncertain tax positions that would result in an asset or liability being recognized in the accompanying financial statements. We file income tax returns in the US federal jurisdiction and various state jurisdictions. We are no longer subject to US federal tax examination for years beginning before January 1, 2013, and the state tax returns that remain subject to examination include those for the years ended December 31, 2012 through the years ended December 31, 2016. |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes all equity-based compensation as stock-based compensation expense based on the fair value of the compensation measured at the grant date. For stock options, fair value is calculated using the Black-Scholes-Merton option pricing model. For restricted stock awards, fair value is the closing stock price for the Company’s common stock on the grant date. The expense is recognized over the vesting period of the grant. See Note 9 for additional information. |
Deferred Rent and Lease Incentives | Deferred Rent and Lease Incentives For leases that contain fixed escalations of the minimum annual lease payment during the original term of the lease, we recognize rental expense on a straight-line basis over the lease term and record the difference between rent expense and the amount currently payable as deferred rent. Deferred lease incentives include construction allowances received from landlords, which are amortized on a straight-line basis over the lease term. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards Going Concern In August 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40)”, which requires an entity’s management to evaluate, for each reporting period, including interim periods, of whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued. Additional disclosures are required if management concludes that conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The new guidance was effective for the Company in the fourth quarter of 2016. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows. Measurement Period Adjustments In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805)”, which simplify the accounting for measurement period adjustments by eliminating the requirements to restate prior period financial statements for these adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The new standard, which should be applied prospectively to measurement period adjustments that occur after the effective date, was effective for the Company in the first quarter of 2016. The adoption of the new accounting rules did not have a material impact on the Company’s financial condition, results of operations or cash flows. Stock-Based Compensation In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Stock Compensation. The objective of this amendment is part of the FASB’s Simplification Initiative as it applies to several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company elected early adoption of ASU 2016-09 in the in the fourth quarter of 2016 which required us to reflect any adjustments as of January 1, 2016. Upon adoption, excess tax benefits or deficiencies from share-based award activity are reflected in the consolidated statements of operations as a component of the provision for income taxes, whereas they previously were recognized in equity. The adoption resulted in approximately $14,900 income tax benefit recognized as of December 31, 2016. The previously unrecognized excess tax benefit of approximately $13,700 as of January 1, 2016 was recorded as an increase to deferred tax asset. The Company did not change its policy with respect to the treatment of forfeitures; and, the Company continues estimating the number of forfeitures. As such, this has no cumulative effect on retained earnings upon adoption. With the early adoption of 2016-09, the Company has elected to present the cash flow statement on a prospective transition method where no prior periods have been adjusted. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards Lease Accounting In February 2016, the FASB issued ASU 2016-02, “Leases”, which will require lessees to recognize a right-of-use asset and a lease liability for all leases that are not short-term in nature. For a lessor, the accounting applied is also largely unchanged from previous guidance. The new rules will be effective for the Company in the first quarter of 2019. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations and cash flows. Although the evaluation is ongoing, the Company expects that the adoption will impact the Company’s financial statements as the standard requires the recognition on the balance sheet of a right of use asset and corresponding lease liability. The Company is currently analyzing its contracts to determine whether they contain a lease under the revised guidance and has not quantified the amount of the asset and liability that will be recognized on the Company’s balance sheet. Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes current revenue recognition requirements and industry-specific guidance. The codification was amended through additional ASUs and, as amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company is required to adopt the new standard in 2018 and may adopt either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption using one of two retrospective application methods. The Company is continuing to evaluate the provisions of this new guidance and has not determined the impact this standard may have on its financial condition, results of operations, cash flows and related disclosures or decided upon the method of adoption. We have considered all other recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our consolidated financial statements. |
Reclassifications | Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. Net income and shareholders’ equity were not affected by these reclassifications. |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Schedule of estimated fair values assigned to the assets and liabilities acquired | The table below summarizes the provisional estimated fair values assigned to the assets and liabilities acquired in addition to the excess of the purchase price over the net assets acquired: Dec. 28, 2016 Accounts receivable 290,692 Property and equipment 572,620 Accounts payable and accrued expenses (138,562 ) Indentifiable intangible assets 2,623,100 Excess attributable to goodwill 1,372,488 Total fair value 4,720,338 Fair value of non-controlling interest (1,888,135 ) Total consideration $ 2,832,203 |
Schedule of the components of intangible assets | The provisional amounts of the components of intangible assets have been estimated as follows: Dec. 28, 2016 Indentifiable intangible assets and goodwill: Trademarks $ 218,000 Patents 970,100 Customer relationships 1,435,000 Goodwill 1,372,488 Total intangible assets and goodwill $ 3,995,588 |
Schedule of unaudited pro forma information presents the results of operations for the year ended | The following unaudited pro forma information presents the results of operations for the year ended December 31, 2016 and 2015, as if the acquisition of SureHarvest had occurred on January 1, 2016 and 2015 Unaudited 2016 2015 Total revenue $ 13,292,825 $ 11,771,317 Net income attributable to Where Food Comes From, Inc. $ 275,553 $ 292,830 Basic and diluted earnings per share $ 0.01 $ 0.01 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | The major categories of property and equipment are as follows as of December 31st: 2016 2015 Automobiles $ 76,676 $ 47,397 Furniture and office equipment 203,797 139,918 Software and tools 952,081 375,257 Website development and other enhancements 183,385 183,385 Building and leasehold improvements 476,274 50,747 Land 2,436 2,436 1,894,649 799,140 Less accumulated depreciation 665,299 641,190 Property and equipment, net $ 1,229,350 $ 157,950 |
Intangible and Other Assets(Tab
Intangible and Other Assets(Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible and other assets | The following table summarizes our intangible assets as of December 31st: Estimated 2016 2015 Useful life Intangible assets subject to amortization: Tradenames and Trademarks $ 282,307 $ 64,307 2.5 - 8.0 years Accreditations 88,663 88,663 5.0 years Customer Relationships 2,836,330 1,401,330 8.0 - 15.0 years Beneficial Lease Arrangement 120,200 120,200 11.0 years Patents 970,100 — 4.0 years 4,297,600 1,674,500 Less accumulated amortization 547,917 392,846 3,749,683 1,281,654 Tradenames/trademarks (not subject to amortization) 465,000 465,000 4,214,683 1,746,654 Deposit 13,545 13,545 $ 4,228,228 $ 1,760,199 |
Schedule of future scheduled amortization | Future scheduled amortization of intangible assets is as follows: Fiscal year ending December 31: 2017 $ 519,759 2018 $ 514,473 2019 $ 503,848 2020 $ 482,035 2021 $ 235,414 Thereafter 1,494,154 $ 3,749,683 |
Notes Payable (Tables)
Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of equipment Note | Equipment Note December 31, 2016 2015 Equipment Note Payable $ — $ 16,211 Less current portion of notes payable and other long-term debt — 7,846 Notes payable and other long-term debt $ — $ 8,365 |
Schedule of future minimum lease payments for capital leases | Future minimum lease payments for capital leases are as follows: Years Ending December 31st, Amount 2017 $ 4,664 2018 4,664 2019 4,664 2020 4,664 2021 2,723 Thereafter — Future minimum lease payments 21,379 Less amount representing interest (1,577 ) Present value of net minimum lease payments 19,802 Less current portion (4,067 ) Capital lease obligations $ 15,735 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of provision for income taxes | The provision for income taxes consists of the following: December 31, 2016 2015 Current income tax expense: Federal $ 63,586 $ — State 1,967 — Total current income tax expense 65,553 — Deferred income tax expense: Federal 164,894 289,205 State 5,100 8,945 Total deferred income tax expense 169,994 298,150 Total income tax expense $ 235,547 $ 298,150 |
Schedule of reconciliation of income taxes | The reconciliation of income taxes calculated at the statutory rates to our effective tax rate is as follows: December 31, 2016 2015 Expected tax expense $ 216,618 $ 270,102 State tax provision, net 18,812 26,656 Permanent differences (3,419 ) 13,278 Business tax credit applied — (33,408 ) Other, net 3,536 21,522 Income tax expense $ 235,547 $ 298,150 |
Schedule of deferred tax assets (liabilities) | The income tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) as of December 31, 2016 and 2015 are as follows: December 31, 2016 2015 Deferred tax assets (liabilities): Net operating loss carryforwards $ — $ 296,543 Accruals, stock based compensation and other 134,298 11,149 Property and equipment (107,189 ) (3,123 ) Intangibles assets (76,549 ) (81,666 ) Charitable contributions — 8,549 Net deferred tax assets (liabilities) (49,440 ) 231,452 |
Stock Buyback Plan (Tables)
Stock Buyback Plan (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Stock Buyback Plan Tables | |
Repurchased shares under the Stock Buyback Plan by year | Activity under the Stock Buyback Plan by are as follows: Number of Shares Cost of Shares Average Cost per Share Shares purchased prior to 2015 546,697 $ 150,849 $ 0.28 Retirement of shares purchased (546,697 ) $ (150,849 ) $ 0.28 Shares purchased during 2015 85,808 $ 177,916 $ 2.07 Shares purchased during 2016 157,127 346,976 $ 2.21 Total 242,935 $ 524,892 $ 2.16 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock option activity under Equity Incentive Plan | The amount of stock-based compensation expense is as follows: 2016 2015 Stock options $ 34,620 $ 68,350 Restricted stock awards 87,251 49,346 Total $ 121,871 $ 117,696 |
Schedule of non-vested options | As of December 31, 2016, the estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows: Years ended December 31st: Unvested stock options Unvested Total 2017 $ 58,814 $ 118,043 $ 176,857 2018 58,695 81,001 139,696 2019 53,552 25,046 78,598 $ 171,061 $ 224,090 $ 395,151 |
Schedule of company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model | The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions: 2016 2015 Number of options awarded to purchase common shares 94,000 shares — Risk free interest rate 1.90% — Expected volatility 163.7% — Assumed dividend yield 0% — Expected life of options from the date of grant 9.8 years — |
Schedule of stock option activity during 2016 and 2015 | The awards typically vest in equal increments over one to three years. Stock option activity during 2016 and 2015 is summarized as follows: Weighted Avg. Weighted Avg. Weighted Avg. Remaining Number of Exercise Price Fair Value Contractual Life Aggregate Awards per Share per Share (in years) Intrinsic Value Outstanding, January 1, 2015 359,168 $ 0.76 $ 0.71 6.58 $ 768,869 Granted — $ — $ — — Exercised (93,165 ) $ 0.54 $ 0.33 3.49 Expired/Forfeited — $ — $ — — Outstanding, December 31, 2015 266,003 $ 0.84 $ 0.85 6.43 $ 416,278 Granted 94,000 $ 1.89 $ 1.87 9.96 Exercised (86,417 ) $ 0.75 $ 0.76 5.22 Expired/Forfeited — $ 0.93 $ 1.97 3.63 Outstanding, December 31, 2016 273,586 $ 1.22 $ 1.22 7.05 $ 217,892 Exercisable, December 31, 2016 172,331 $ 0.83 $ 0.85 5.46 $ 204,438 Unvested, December 31, 2016 101,255 $ 1.89 $ 1.87 9.75 $ 13,454 |
Schedule of restricted stock awards for the fiscal years | The following table summarizes activity for restricted stock awards for the fiscal years presented: Weighted Avg Number of Grant Date Options Fair Value Non-vested restricted shares, December 31, 2014 — $ — Granted 83,000 $ 2.68 Vested (9,000 ) $ 3.08 Forfeited — $ — Non-vested restricted shares, December 31, 2015 74,000 $ 2.63 Granted 62,500 $ 2.22 Vested — $ — Forfeited (500 ) $ 2.10 Non-vested restricted shares, December 31, 2016 136,000 $ 2.44 |
Basic and Diluted Net Income 30
Basic and Diluted Net Income per Share (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliation of basic and diluted income per share computations | The following is a reconciliation of the share data used in the basic and diluted income per share computations: Year ended December 31, 2016 2015 Basic: Weighted average shares outstanding 23,818,762 23,797,236 Diluted: Weighted average shares outstanding 23,818,762 23,797,236 Weighted average effects of dilutive securities 145,264 177,138 Total 23,964,026 23,974,374 Antidilutive securities: 152,168 95,834 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of operating leases future minimum lease payments | Future minimum lease payments are as follows: Years ended December 31st: Total 2017 $ 245,098 2018 220,749 2019 227,060 2020 233,871 2021 240,888 Thereafter 2,707,132 Total lease commitments $ 3,874,797 |
Schedule of redeemable noncontrolling interest | Below reflects the activity of the redeemable non-controlling interest as of and for the years ended December 31, 2016 and 2015. Balance, January 1, 2015 $ 974,019 Net loss attributable to non-controlling interest in Validus for the year ended December 31, 2015 (37,649 ) Balance, December 31, 2015 936,370 Net loss attributable to non-controlling interest in Validus for the year to date period ended February 29, 2016 (31,605 ) Acquisition of non-controlling interest in Validus on March 1, 2016 Cash paid (162,707 ) Fair market value of stock (200,072 ) Adjustment to additional paid-in-capital (541,986 ) Fair value of non-controlling interest in SureHarvest on December 28, 2016 1,888,135 Balance, December 31, 2016 $ 1,888,135 |
Supplemental Cash Flow Inform32
Supplemental Cash Flow Information (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Supplemental Cash Flow Information [Abstract] | |
Schedule of supplemental cash flow information | Year to date ended December 31, 2016 2015 Cash paid during the year: Interest expense $ 1,517 $ 1,585 Income taxes $ — $ — Non-cash investing and financing activities: Common stock issued for remaining interest in Validus Verification Services LLC $ 200,072 $ — Common stock issued for 60% interest in SureHarvest Services LLC $ 1,710,213 $ — Equipment acquired under capital lease $ 22,439 $ — Lease Incentive Obligation $ 162,540 $ — |
The Company and Basis of Pres33
The Company and Basis of Presentation (Details Narrative) - Number | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 28, 2016 | Feb. 29, 2016 | Sep. 16, 2013 | |
Restructuring Cost and Reserve [Line Items] | ||||
Number of operating segment | 1 | |||
Validus Acquisition [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Percentage of business acquired | 40.00% | 60.00% | ||
International Certification Services, Inc. [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Percentage of business acquired | 40.00% | |||
SureHarvest Services LLC [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Percentage of business acquired | 60.00% | 60.00% |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | Dec. 28, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2013 |
Allowance for doubtful accounts | $ 17,900 | $ 18,100 | ||
Fair value inputs, terminal value | 3.00% | |||
Carrying value of goodwill | $ 2,652,250 | 1,279,762 | ||
Amortization of capitalized software costs | 43,000 | 43,000 | ||
Advertising expense | 79,400 | 31,600 | ||
Income tax benefit recognized from compensation expense | 14,900 | $ 13,700 | ||
International Certification Services, Inc. [Member] | ||||
Carrying value of goodwill | 533,000 | |||
Validus Acquisition [Member] | ||||
Carrying value of goodwill | 746,800 | |||
Internally developed software acquired | $ 129,000 | |||
SureHarvest Services LLC [Member] | ||||
Carrying value of goodwill | $ 1,372,488 | $ 1,372,500 | ||
Internally developed software acquired | $ 558,000 | |||
Building [Member] | ||||
Depreciable lives | 20 years | |||
Lower Range [Member] | ||||
Fair value inputs, discount rate | 19.00% | |||
Definite lived intangible assets useful life | 2 years | |||
Lower Range [Member] | SureHarvest Services LLC [Member] | ||||
Definite lived intangible assets useful life | 3 years | |||
Lower Range [Member] | Other Property and Equipment [Member] | ||||
Depreciable lives | 2 years | |||
Upper Range [Member] | ||||
Fair value inputs, discount rate | 22.00% | |||
Definite lived intangible assets useful life | 15 years | |||
Upper Range [Member] | SureHarvest Services LLC [Member] | ||||
Definite lived intangible assets useful life | 15 years | |||
Upper Range [Member] | Other Property and Equipment [Member] | ||||
Depreciable lives | 7 years | |||
Revenue Concentration [Member] | ||||
Threshold for significant customer identification | 10.00% | 10.00% | ||
Accounts Receivable Concentration [Member] | ||||
Threshold for significant customer identification | 10.00% | 10.00% |
Business Acquisitions (Details
Business Acquisitions (Details Narrative) - USD ($) | Dec. 28, 2016 | Feb. 29, 2016 | Dec. 31, 2016 | Jun. 30, 2016 | Sep. 16, 2013 |
Ownership percentage | 27.00% | ||||
Value of shares issued upon acquisition | $ 200,072 | ||||
Share price (in dollars per share) | $ 2.55 | ||||
Lower Range [Member] | |||||
Useful lives for intangible assets | 2 years | ||||
Upper Range [Member] | |||||
Useful lives for intangible assets | 15 years | ||||
Validus Acquisition [Member] | |||||
Non-controlling interest | $ 0 | ||||
Ownership percentage | 100.00% | ||||
Call option percentage interest to be acquired | 40.00% | ||||
Right of first refusal percentage interest to be acquired | 40.00% | ||||
Percentage of business acquired | 40.00% | 60.00% | |||
Cash payments for acquisition | $ 162,700 | ||||
Number of shares issued upon acquisition | 93,057 | ||||
Value of shares issued upon acquisition | $ 200,100 | ||||
Percentage of remaining ownership interest | 40.00% | ||||
Adjusted to APIC | 541,986 | $ (541,986) | |||
Adjusted to APIC,tax | $ 110,898 | ||||
Validus Acquisition [Member] | Praedium Ventures LLC [Member] | |||||
Percentage of business acquired | 40.00% | ||||
SureHarvest Services LLC [Member] | |||||
Percentage of business acquired | 60.00% | 60.00% | |||
Total consideration for acquisition | $ 2,832,203 | ||||
Cash payments for acquisition | $ 1,122,000 | ||||
Number of shares issued upon acquisition | 850,852 | ||||
Value of shares issued upon acquisition | $ 1,710,213 | ||||
Share price (in dollars per share) | $ 2.01 | ||||
Percentage of remaining ownership interest | 40.00% | 60.00% | |||
Assumed purchase price of remaining ownership interest | $ 8,000,000 | ||||
SureHarvest Services LLC [Member] | Lower Range [Member] | |||||
Useful lives for intangible assets | 3 years | ||||
SureHarvest Services LLC [Member] | Upper Range [Member] | |||||
Useful lives for intangible assets | 15 years |
Business Acquisitions (Details)
Business Acquisitions (Details) - USD ($) | Dec. 28, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Excess attributable to goodwill | $ 2,652,250 | $ 1,279,762 | |
SureHarvest Services LLC [Member] | |||
Accounts receivable | $ 290,692 | ||
Property and equipment | 572,620 | ||
Accounts payable and accrued expenses | (138,562) | ||
Indentifiable intangible assets | 2,623,100 | ||
Excess attributable to goodwill | 1,372,488 | $ 1,372,500 | |
Total fair value | 4,720,338 | ||
Fair value of non-controlling interest | (1,888,135) | ||
Total consideration | $ 2,832,203 |
Business Acquisitions (Detail37
Business Acquisitions (Details 1) - USD ($) | Dec. 31, 2016 | Dec. 28, 2016 | Dec. 31, 2015 |
Goodwill | $ 2,652,250 | $ 1,279,762 | |
SureHarvest Services LLC [Member] | |||
Goodwill | $ 1,372,500 | $ 1,372,488 | |
Total intangible assets and goodwill | 3,995,588 | ||
SureHarvest Services LLC [Member] | Trademarks [Member] | |||
Indentifiable intangible assets and goodwill | 218,000 | ||
SureHarvest Services LLC [Member] | Patents [Member] | |||
Indentifiable intangible assets and goodwill | 970,100 | ||
SureHarvest Services LLC [Member] | Customer Relationships [Member] | |||
Indentifiable intangible assets and goodwill | $ 1,435,000 |
Business Acquisitions (Detail38
Business Acquisitions (Details 2) - Asset Purchase Agreement [Member] - SureHarvest Services LLC [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Pro Forma Results of operations: | ||
Total revenue | $ 13,292,825 | $ 11,771,317 |
Net income attributable to Where Food Comes From, Inc. | $ 275,553 | $ 292,830 |
Basic and diluted earnings per share | $ 0.01 | $ 0.01 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 1,894,649 | $ 799,140 |
Accumulated Depreciation | 665,299 | 641,190 |
Property and equipment, net | 1,229,350 | 157,950 |
Automobiles [Member] | ||
Property and equipment, gross | 76,676 | 47,397 |
Furniture and office equipment [Member] | ||
Property and equipment, gross | 203,797 | 139,918 |
Software and tools [Member] | ||
Property and equipment, gross | 952,081 | 375,257 |
Website development and other enhancements [Member] | ||
Property and equipment, gross | 183,385 | 183,385 |
Building and Leasehold Improvements [Member] | ||
Property and equipment, gross | 476,274 | 50,747 |
Land [Member] | ||
Property and equipment, gross | $ 2,436 | $ 2,436 |
Property and Equipment (Detai40
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 112,600 | $ 100,200 |
Intangible and Other Assets (De
Intangible and Other Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization Expense | $ 155,100 | $ 156,000 |
Intangible and Other Assets (42
Intangible and Other Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Intangible and other assets, gross | $ 4,297,600 | $ 1,674,500 |
Accumulated amortization | 547,917 | 392,846 |
Intangible and other assets, net | 3,749,683 | 1,281,654 |
Tradenames/trademarks (not subject to amortization) | 465,000 | 465,000 |
Intangible and other assets,Before deposit | 4,214,683 | 1,746,654 |
Deposit | 13,545 | 13,545 |
Intangible and other assets, net | $ 4,228,228 | 1,760,199 |
Upper Range [Member] | ||
Estimated Useful Life | 15 years | |
Lower Range [Member] | ||
Estimated Useful Life | 2 years | |
Trademarks [Member] | ||
Intangible and other assets, gross | $ 282,307 | 64,307 |
Trademarks [Member] | Upper Range [Member] | ||
Estimated Useful Life | 8 years | |
Trademarks [Member] | Lower Range [Member] | ||
Estimated Useful Life | 2 years 6 months | |
Accreditations [Member] | ||
Intangible and other assets, gross | $ 88,663 | 88,663 |
Estimated Useful Life | 5 years | |
Customer Relationships [Member] | ||
Intangible and other assets, gross | $ 2,836,330 | 1,401,330 |
Customer Relationships [Member] | Upper Range [Member] | ||
Estimated Useful Life | 15 years | |
Customer Relationships [Member] | Lower Range [Member] | ||
Estimated Useful Life | 8 years | |
Beneficial lease arrangement [Member] | ||
Intangible and other assets, gross | $ 120,200 | $ 120,200 |
Estimated Useful Life | 11 years | |
Patents [Member] | ||
Intangible and other assets, gross | $ 970,100 | |
Estimated Useful Life | 4 years |
Intangible and Other Assets (43
Intangible and Other Assets (Details 1) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Future scheduled amortization for the fiscal year ending December 31 | ||
2,017 | $ 519,759 | |
2,018 | 514,473 | |
2,019 | 503,848 | |
2,020 | 482,035 | |
2,021 | 235,414 | |
Thereafter | 1,494,154 | |
Intangible and other assets, net | $ 3,749,683 | $ 1,281,654 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2012 | |
Office Equipment [Member] | |||
Maturity date on lease | Jul. 31, 2021 | Apr. 30, 2017 | |
Rent payments | $ 405 | ||
Asset cost, included in property and equipment | $ 22,400 | $ 22,300 | |
Amorization period of leased assets | 5 years 3 months | 5 years 3 months | |
Effective interest rate | 3.33% | 5.25% | |
Revolving Line of Credit [Member] | |||
Debt instrument, face amount | $ 70,050 | ||
Maturity date on debt | Apr. 1, 2017 | ||
Effective interest rate | 6.00% | ||
Interest rate, basis spread | 2.23% | ||
Interest rate description | New York prime rate plus 2.25%. | ||
Collateral description | Collateralized by all the business assets of ICS. | ||
Note Payable - Vehicle [Member] | |||
Debt instrument, face amount | $ 37,407 | ||
Interest and principal payments | $ 715 | ||
Interest rate | 5.50% | ||
Debt instrument term | 5 years | ||
Collateral description | Collateralized by the vehicle. |
Notes Payable (Details)
Notes Payable (Details) | Dec. 31, 2015USD ($) |
Notes payable | |
Equipment Note Payable | $ 16,211 |
Less current portion of notes payable and other long-term debt | (7,846) |
Notes payable and other long-term debt | $ 8,365 |
Notes Payable (Details 1)
Notes Payable (Details 1) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
2,017 | $ 4,664 | |
2,018 | 4,664 | |
2,019 | 4,664 | |
2,020 | 4,664 | |
2,021 | 2,723 | |
Future minimum lease payments | 21,379 | |
Less amount representing interest | (1,577) | |
Present value of net minimum lease payments | 19,802 | |
Less current portion | (4,067) | $ (4,634) |
Capital lease obligations | $ 15,735 | $ 1,776 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Income Tax Disclosure [Abstract] | |
Operating loss carryforwards | $ 801,500 |
Operating loss carryforwards , expiration date | 2,026 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Current income tax expense: | ||
Federal | $ 63,586 | |
State | 1,967 | |
Total current income tax expense | 65,553 | |
Deferred income tax expense: | ||
Federal | 164,894 | $ 289,205 |
State | 5,100 | 8,945 |
Total deferred income tax expense | 169,994 | 298,150 |
Income tax expense | $ 235,547 | $ 298,150 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Expected tax expense | $ 216,618 | $ 270,102 |
State tax provision, net | 18,812 | 26,656 |
Permanent differences | (3,419) | 13,278 |
Business tax credit applied | (33,408) | |
Other, net | 3,536 | 21,522 |
Income tax expense | $ 235,547 | $ 298,150 |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax assets (liabilities): | ||
Net operating loss carryforwards | $ 296,543 | |
Accruals, stock based compensation and other | $ 134,298 | 11,149 |
Property and equipment | (107,189) | (3,123) |
Intangibles assets | (76,549) | (81,666) |
Charitable contributions | 8,549 | |
Net deferred tax assets (liabilities) | $ (49,440) | $ 231,452 |
Stock Buyback Plan (Details)
Stock Buyback Plan (Details) - USD ($) | 12 Months Ended | 72 Months Ended | 96 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2013 | Dec. 31, 2015 | |
Stock Buyback Plan Details | ||||
Cost of shares | $ 346,976 | $ 177,916 | $ 150,849 | $ 177,916 |
Number of shares | 157,127 | 546,697 | 85,808 | |
Average cost per share | $ 2.21 | $ 0.28 | $ 2.07 | |
Retirement of shares purchased | $ (150,849) | |||
Retirement of shares purchased, shares | (546,697) | |||
Retirement of shares purchased, average cost per share | $ (0.28) |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) | 12 Months Ended |
Dec. 31, 2016USD ($)shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Compensation cost not yet recognized, options | $ | $ 171,061 |
Lower Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock option activity vesting period | 1 year |
Lower Range [Member] | Restricted Stock Awards [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock option activity vesting period | 1 year |
Upper Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock option activity vesting period | 3 years |
Upper Range [Member] | Restricted Stock Awards [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Stock option activity vesting period | 3 years |
2006 Equity Incentive Plan (the "2006 Plan") [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares authorized for issuance under incentive plan | 3,000,000 |
Shares outstanding | 282,086 |
Numbers of forfeited option nonvested | 500 |
2016 Equity Incentive Plan (the "2016 Plan") [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares authorized for issuance under incentive plan | 5,000,000 |
Shares outstanding | 4,873,000 |
Stock-Based Compensation (Det53
Stock-Based Compensation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 121,871 | $ 117,696 |
Stock Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | 34,620 | 68,350 |
Restricted Stock Awards [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 87,251 | $ 49,346 |
Stock-Based Compensation (Det54
Stock-Based Compensation (Details 1) | Dec. 31, 2016USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | $ 171,061 |
Unvested restricted stock awards | 224,090 |
Total Unrecognized Compensation Expense | 395,151 |
2017 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 58,814 |
Unvested restricted stock awards | 118,043 |
Total Unrecognized Compensation Expense | 176,857 |
2018 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 58,695 |
Unvested restricted stock awards | 81,001 |
Total Unrecognized Compensation Expense | 139,696 |
2019 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 53,552 |
Unvested restricted stock awards | 25,046 |
Total Unrecognized Compensation Expense | $ 78,598 |
Stock-Based Compensation (Det55
Stock-Based Compensation (Details 2) | 12 Months Ended |
Dec. 31, 2016shares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Number of options awarded to purchase common shares | 94,000 |
Risk free interest rate | 1.90% |
Expected volatility | 163.70% |
Assumed dividend yield | 0.00% |
Expected life of options from the date of grant | 9 years 9 months 18 days |
Stock-Based Compensation (Det56
Stock-Based Compensation (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Awards | ||
Balance, beginning | 266,003 | 359,168 |
Granted | 94,000 | |
Exercised | (86,417) | (93,165) |
Balance, ending | 273,586 | 266,003 |
Exercisable, ending | 172,331 | |
Unvested, ending | 101,255 | |
Weighted Avg. Exercise Price per Share | ||
Balance, beginning | $ 0.84 | $ 0.76 |
Granted | 1.89 | |
Exercised | 0.75 | 0.54 |
Expired/Forfeited | 0.93 | |
Balance, ending | 1.22 | 0.84 |
Exercisable, ending | 0.83 | |
Unvested, ending | 1.89 | |
Weighted Avg Fair Value per Share | ||
Balance, beginning | 0.85 | 0.71 |
Granted | 1.87 | |
Exercised | 0.76 | 0.33 |
Expired/Forfeited | 1.97 | |
Balance, ending | 1.22 | $ 0.85 |
Exercisable, ending | 0.85 | |
Unvested, ending | $ 1.87 | |
Weighted Avg Remaining Contractual Life (in years) | ||
Balance, beginning | 6 years 5 months 4 days | 6 years 6 months 29 days |
Granted | 9 years 11 months 16 days | |
Exercised | 5 years 2 months 19 days | 3 years 5 months 27 days |
Expired/Forfeited | 3 years 7 months 17 days | |
Balance, ending | 7 years 18 days | 6 years 5 months 4 days |
Exercisable, ending | 5 years 5 months 16 days | |
Unvested, ending | 9 years 9 months | |
Aggregate Intrinsic Value. | ||
Balance, beginning | $ 416,278 | $ 768,869 |
Balance, ending | 217,892 | $ 416,278 |
Exercisable, ending | 204,438 | |
Unvested, ending | $ 13,454 |
Stock-Based Compensation (Det57
Stock-Based Compensation (Details 4) - Restricted Stock Awards [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of Options | ||
Non-vested restricted shares, beginning | 74,000 | |
Granted | 62,500 | 83,000 |
Vested | (9,000) | |
Forfeited | (500) | |
Non-vested restricted shares, ending | 136,000 | 74,000 |
Weighted Avg Grant Date Fair Value | ||
Non-vested restricted shares, beginning | $ 2.63 | |
Granted | 2.22 | $ 2.68 |
Vested | 3.08 | |
Forfeited | 2.1 | |
Non-vested restricted shares, ending | $ 2.44 | $ 2.63 |
Basic and Diluted Net Income 58
Basic and Diluted Net Income per Share (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Basic: | ||
Weighted average shares outstanding | 23,818,762 | 23,797,236 |
Diluted: | ||
Weighted average shares outstanding | 23,964,026 | 23,974,374 |
Weighted average effects of dilutive securities | 145,264 | 177,138 |
Total | 23,964,026 | 23,974,374 |
Antidilutive securities | $ 152,168 | $ 95,834 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Related Party Transactions [Abstract] | ||
Revenue from related parties | $ 12,000 | $ 16,000 |
Ownership by related party | 27.00% | |
Rent expense | $ 88,100 |
Commitments and Contingencies60
Commitments and Contingencies (Details Narrative) | 1 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2013USD ($) | Sep. 30, 2016ft² | Dec. 31, 2016USD ($)aft²Number | Dec. 31, 2015USD ($) | |
Ownership by related party | 27.00% | |||
Rent expenses | $ 204,200 | $ 121,300 | ||
Discretionary matching contribution | 45,300 | $ 26,300 | ||
SureHarvest Services LLC [Member] | Soquel [Member] | ||||
Monthly rental rate | $ 2,700 | |||
Lease expiration date | Nov. 30, 2017 | |||
SureHarvest Services LLC [Member] | Modesto [Member] | ||||
Monthly rental rate | $ 600 | |||
North Dakota Office [Member] | ||||
Term of the operating lease | 5 years | |||
Renewal term of lease | 5 years | |||
Renewal options | Number | 1 | |||
Monthly rental rate | $ 150 | |||
Area of land owned, lease office space | a | 0.75 | |||
Number of square foot of leased space | ft² | 2,300 | |||
Lease expiration date | Mar. 1, 2018 | |||
Castle Rock New Lease [Member] | ||||
Term of the operating lease | 5 years | |||
Renewal options | Number | 2 | |||
Monthly rental rate | $ 19,000 | |||
Incremental rent increase per year | 3.00% | |||
Number of square foot of leased space | ft² | 8,000 | |||
Amorization period of leased assets | 15 years | |||
Deferred rent | $ 21,000 | |||
Leasehold improvements | $ 406,400 | |||
Castle Rock New Lease [Member] | CEO and President[Member] | ||||
Ownership by related party | 27.00% | |||
Urbandale, Iowa Office[Member] | Related Party [Member] | ||||
Term of the operating lease | 3 years | |||
Monthly rental rate | $ 2,600 | |||
Lease expiration date | Oct. 31, 2016 |
Commitments and Contingencies61
Commitments and Contingencies (Details) | Dec. 31, 2016USD ($) |
Operating leases future minimum lease payments | |
2,017 | $ 245,098 |
2,018 | 220,749 |
2,019 | 227,060 |
2,020 | 233,871 |
2,021 | 240,888 |
Thereafter | 2,707,132 |
Total lease commitments | $ 3,874,797 |
Commitments and Contingencies62
Commitments and Contingencies (Details 1) - USD ($) | Feb. 29, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Restructuring Cost and Reserve [Line Items] | |||
Redeemable noncontrolling interest, beginning | $ 936,370 | ||
Acquisition of non-controlling interest, March 1, 2016 | |||
Redeemable noncontrolling interest, ending | 1,888,135 | $ 936,370 | |
Validus Acquisition [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Redeemable noncontrolling interest, beginning | 936,370 | 974,019 | |
Net loss attributable to non-controlling interest | (31,605) | (37,649) | |
Acquisition of non-controlling interest, March 1, 2016 | |||
Cash paid | (162,707) | ||
Fair market value of stock | (200,072) | ||
Adjusted to APIC | $ 541,986 | (541,986) | |
Redeemable noncontrolling interest, ending | 1,888,135 | $ 936,370 | |
SureHarvest Services LLC [Member] | |||
Acquisition of non-controlling interest, March 1, 2016 | |||
Fair value of non-controlling interest | $ 1,888,135 |
Supplemental Cash Flow Inform63
Supplemental Cash Flow Information (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash paid during the year: | ||
Interest | $ 1,517 | $ 1,585 |
Non-cash investing and financing activities: | ||
Equipment acquired under capital lease | 22,439 | |
Lease incentive obligation | 162,540 | |
Validus Acquisition [Member] | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisitoin of Validus Verification Services, remaining interest | 200,072 | |
SureHarvest Services LLC [Member] | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisitoin of Validus Verification Services, remaining interest | $ 1,710,213 |