Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 07, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Where Food Comes From, Inc. | |
Entity Central Index Key | 1,360,565 | |
Document Type | 10-Q | |
Trading Symbol | WFCF | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 25,087,946 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 2,243,782 | $ 2,705,778 |
Accounts receivable, net of allowance | 2,563,148 | 1,898,749 |
Short-term investments | 496,402 | 743,206 |
Prepaid expenses and other current assets | 307,476 | 245,073 |
Total current assets | 5,610,808 | 5,592,806 |
Property and equipment, net | 1,789,384 | 1,068,087 |
Intangible and other assets, net | 4,867,464 | 3,948,530 |
Goodwill | 3,213,444 | 2,652,250 |
Deferred tax assets, net | 22,246 | 79,622 |
Total assets | 15,503,346 | 13,341,295 |
Current liabilities: | ||
Accounts payable | 735,732 | 457,307 |
Accrued expenses and other current liabilities | 1,045,742 | 555,129 |
Customer deposits and deferred revenue | 976,876 | 851,185 |
Current portion of notes payable | 9,986 | 9,446 |
Current portion of capital lease obligations | 11,234 | 7,527 |
Total current liabilities | 2,779,570 | 1,880,594 |
Notes payable, net of current portion | 34,850 | 42,452 |
Capital lease obligations, net of current portion | 35,603 | 25,419 |
Lease incentive obligation | 369,282 | 147,189 |
Total liabilities | 3,219,305 | 2,095,654 |
Commitments and contingencies (Note 9) | ||
Contingently redeemable non-controlling interest | 1,521,504 | 1,574,765 |
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; 25,473,115 (2018) and 24,972,684 (2017) shares issued, and 25,087,946 (2018) and 24,652,895 (2017) shares outstandin | 25,473 | 24,972 |
Additional paid-in-capital | 10,995,375 | 10,353,037 |
Treasury stock of 385,169 (2018) and 319,789 (2017) shares | (865,380) | (724,530) |
Retained earnings | 607,069 | 17,397 |
Total equity | 10,762,537 | 9,670,876 |
Total liabilities and stockholders' equity | $ 15,503,346 | $ 13,341,295 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 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 (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 95,000,000 | 95,000,000 |
Common stock, shares issued | 25,473,115 | 24,972,684 |
Common stock, shares outstanding | 25,087,946 | 24,652,895 |
Treasury stock, shares | 385,169 | 319,789 |
Consolidated Statements of Inco
Consolidated Statements of Income (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues: | ||||
Verification and certification service revenue | $ 3,906,996 | $ 3,672,587 | $ 10,210,947 | $ 9,152,520 |
Product sales | 783,303 | 687,235 | 1,633,509 | 1,226,141 |
Software license, maintenance and support services revenue | 208,541 | 243,186 | 759,301 | 532,684 |
Software-related consulting service revenue | 226,538 | 131,427 | 580,731 | 399,120 |
Total revenues | 5,125,378 | 4,734,435 | 13,184,488 | 11,310,465 |
Costs of revenues: | ||||
Costs of verification and certification services | 2,098,462 | 2,096,907 | 5,399,626 | 4,928,139 |
Costs of products | 489,149 | 410,309 | 1,035,094 | 743,308 |
Costs of software license, maintenance and support services | 183,942 | 141,902 | 489,887 | 362,139 |
Costs of software-related consulting services | 117,303 | 43,981 | 280,310 | 182,718 |
Total costs of revenues | 2,888,856 | 2,693,099 | 7,204,917 | 6,216,304 |
Gross profit | 2,236,522 | 2,041,336 | 5,979,571 | 5,094,161 |
Selling, general and administrative expenses | 1,819,019 | 1,591,597 | 5,293,961 | 4,773,446 |
Income from operations | 417,503 | 449,739 | 685,610 | 320,715 |
Other expense (income): | ||||
Dividend income from Progressive Beef | (100,000) | (100,000) | ||
Other income, net | (3,516) | (1,691) | (11,556) | (10,989) |
Interest expense | 1,361 | 287 | 3,755 | 603 |
Income before income taxes | 519,658 | 451,143 | 793,411 | 331,101 |
Income tax expense | 169,000 | 199,000 | 257,000 | 150,000 |
Net income | 350,658 | 252,143 | 536,411 | 181,101 |
Net loss attributable to non-controlling interest | 26,691 | 38,049 | 53,261 | 286,841 |
Net income attributable to Where Food Comes From, Inc. | $ 377,349 | $ 290,192 | $ 589,672 | $ 467,942 |
Per share - net income attributable to Where Food Comes From, Inc.: | ||||
Basic (in dollars per share) | $ 0.02 | $ 0.01 | $ 0.02 | $ 0.02 |
Diluted (in dollars per share) | $ 0.02 | $ 0.01 | $ 0.02 | $ 0.02 |
Weighted average number of common shares outstanding: | ||||
Basic (in shares) | 24,900,919 | 24,705,934 | 24,756,262 | 24,673,080 |
Diluted (in shares) | 25,074,477 | 24,886,147 | 24,938,699 | 24,834,931 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Operating activities: | ||
Net income | $ 536,411 | $ 181,101 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 742,780 | 634,152 |
Lease incentive obligation | (8,127) | (8,127) |
Stock-based compensation expense | 125,239 | 130,637 |
Common stock issued for services rendered | 25,000 | |
Deferred tax expense (benefit) | 57,376 | (207,000) |
Bad debt expense | 10,000 | 17,525 |
Changes in operating assets and liabilities, net of effect from acquisitions: | ||
Accounts receivable | (674,398) | (584,154) |
Short-term investments | (3,196) | (7,635) |
Prepaid expenses and other assets | (62,403) | (177,517) |
Accounts payable | 278,425 | 385,242 |
Accrued expenses and other current liabilities | 490,613 | 846,044 |
Customer deposits and deferred revenue | 125,691 | 324,889 |
Net cash provided by operating activities | 1,618,411 | 1,560,157 |
Investing activities: | ||
Acquisition of Sow Organic | (450,000) | |
Acquisition of JVF Consulting | (500,000) | |
Investment in Progressive Beef | (900,000) | |
Acquisition of A Bee Organic | (150,000) | |
Proceeds from maturity of short-term investments | 250,000 | |
Purchases of property and equipment | (325,227) | (55,609) |
Purchases of other long-term assets | (1,350) | |
Net cash used in investing activities | (1,926,577) | (205,609) |
Financing activities: | ||
Repayments of notes payable | (7,062) | |
Repayments of capital lease obligations | (5,918) | (3,038) |
Proceeds from stock option exercise | 8,168 | |
Stock repurchase under Stock Buyback Plan | (140,850) | (39,796) |
Net cash used in financing activities | (153,830) | (34,666) |
Net change in cash | (461,996) | 1,319,882 |
Cash at beginning of year | 2,705,778 | 2,489,985 |
Cash at end of year | $ 2,243,782 | $ 3,809,867 |
Consolidated Statement of Equit
Consolidated Statement of Equity (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Treasury Stock [Member] | Retained Earnings [Member] | Total |
Balance, beginning at Dec. 31, 2017 | $ 24,972 | $ 10,353,037 | $ (724,530) | $ 17,397 | $ 9,670,876 |
Balance, beginning, shares at Dec. 31, 2017 | 24,652,895 | 24,652,895 | |||
Effect of acquisition fair value adjustment | (321,937) | $ (321,937) | |||
Stock-based compensation expense | 125,239 | 125,239 | |||
Issuance of common shares in acquisition of Sow Organic LLC | $ 218 | 432,913 | 433,131 | ||
Issuance of common shares in acquisition of Sow Organic LLC, shares | 217,654 | ||||
Issuance of common shares for investment in Progressive Beef LLC | $ 50 | 91,065 | 91,115 | ||
Issuance of common shares for investment in Progressive Beef LLC, shares | 50,340 | ||||
Issuance of common shares in acquisition of JVF Consulting LLC | $ 159 | 315,132 | 315,291 | ||
Issuance of common shares in acquisition of JVF Consulting LLC, shares | 158,437 | ||||
Repurchase of common shares under Stock Buyback Plan | (140,850) | (140,850) | |||
Repurchase of common shares under Stock Buyback Plan, shares | (65,380) | ||||
Vesting of restricted shares issued to employees | $ 74 | (74) | |||
Vesting of restricted shares issued to employees, shares | 74,000 | ||||
Net income attributable to Where Food Comes From, Inc. | 589,672 | 589,672 | |||
Balance, ending at Sep. 30, 2018 | $ 25,473 | $ 10,995,375 | $ (865,380) | $ 607,069 | $ 10,762,537 |
Balance, ending, shares at Sep. 30, 2018 | 25,087,946 | 25,087,946 |
The Company and Basis of Presen
The Company and Basis of Presentation | 9 Months Ended |
Sep. 30, 2018 | |
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 are an independent, third-party food verification company conducting both on-site and desk audits to verify that claims being made about livestock, food, other high-value specialty crops and agricultural products are accurate. We care about food and other agricultural products, how it is grown and raised, the quality of what we eat, what farmers and ranchers do, and authentically telling that story to the consumer. Our team visits farms and ranches and looks at their plants, animals, and records, and compares the information we collect to specific standards or claims that farms and ranches want to make about how they are producing food. We strive to ensure that everyone involved in the food business - from growers and farmers to retailers and shoppers – can count on WFCF to provide authentic and transparent information about the food we eat and how, where, and by whom it is produced. We also provide sustainability programs, compliance management and farming information management solutions to drive sustainable value creation. We employ a software-as-a-service (“SaaS”) revenue model that bundles annual software licenses with ongoing software enhancements and upgrades and a wide range of professional services that generate incremental revenue specific to the food and agricultural industry. Finally, the Company’s Where Food Comes From Source Verified® retail and restaurant labeling program utilizes the verification of product attributes to connect consumers directly to the source of the food they purchase through product labeling and web-based information sharing and education. Most of our customers are located throughout the United States. Basis of Presentation Our unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the results of operations, financial position and cash flows of and its subsidiaries, International Certification Services, Inc. (“ICS”), Validus Verifications Services, LLC (“Validus”), Sterling Solutions (“Sterling”), SureHarvest Services, Inc. (“SureHarvest”), A Bee Organic and our most recent acquisitions, Sow Organic and JVF Consulting (collectively referred to as “we,” “us,” and “our” throughout this Form 10-Q) 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. The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements and footnotes thereto for the year ended December 31, 2017, included in our Form 10-K filed on April 2, 2018. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations. The consolidated operating results for the quarter and year to date period ended September 30, 2018 are not necessarily indicative of the results to be expected for any other interim period of any future year. Reclassifications Certain prior year amounts have been reclassified to conform to current year presentation. Net income and shareholders’ equity were not affected by these reclassifications. Seasonality Our business is subject to seasonal fluctuations. Significant portions of our verification and certification service revenue are typically realized during late May through early October when the calf marketings and the growing seasons are at their peak. Because of the seasonality of the business and our industry, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year. Recent Accounting Pronouncements The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (ASC 606), which created a comprehensive, five-step model for revenue recognition that requires a company to recognize revenue to depict the transfer of promised goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Under ASC 606, a company will be required to use more judgment and make more estimates when considering contract terms as well as relevant facts and circumstances when identifying performance obligations, estimating the amount of variable consideration in the transaction price and allocating the transaction price to each separate performance obligation. The Company adopted this standard on January 1, 2018 using the modified retrospective approach. Refer to Note 12, “Revenue,” for a further discussion on the adoption of ASC 606. In January 2016, the FASB issued ASU No. 2016-01 which requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present the changes in instrument-specific credit risk for financial liabilities measured using the fair value option in Other Comprehensive Income; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available-for-sale debt securities in combination with other deferred tax assets. The Update provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The update also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The Company adopted this standard on January 1, 2018. Recently Issued Accounting Pronouncements 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. We continue to execute on our implementation plan and gather lease data to derive the impact of the ASU on its financial statements. 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 adoption is anticipated to have a material impact on assets and liabilities on the balance sheet effective January 1, 2019. However, we do not expect the adoption to have a material impact to our consolidated results of operations or statement of cash flows. In June 2016 the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current U.S. GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument’s contractual life. The Company is required to adopt the new standard in 2020. In April 2017, the FASB has issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which removes Step 2 from the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company is required to adopt the new standard in 2020. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to Accounting Standards Codification (“ASC”) 718 upon vesting which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. We are in the process of evaluating the impact of adoption of this ASU on our consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 8420): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the requirements associated with the hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The provisions of this ASU are effective for reporting periods after December 15, 2019; early adoption is permitted. We are currently evaluating the effect that this ASU will have on our consolidated financial statements. |
Business Acquisitions
Business Acquisitions | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Business Acquisitions | Note 2 – Business Acquisitions SureHarvest Acquisition On December 28, 2016, Pursuant to the SureHarvest Purchase Agreement, WFCF purchased the business assets of the Seller for total consideration of approximately $2.66 million, comprised of approximately $1,122,000 in cash and 850,852 shares of common stock of WFCF valued at approximately $1,534,900. Additionally, we issued the Seller a 40% membership interest in SureHarvest, with the Company holding a 60% interest. Following the thirty-six-month anniversary of the effective date of the SureHarvest 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 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 ceiling. 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 consolidated balance sheet. A Bee Organic Acquisition On May 30, 2017, we acquired A Bee Organic for $150,000 in cash and 45,684 shares of common stock of WFCF valued at approximately $98,000 based on the closing price of our stock on May 30, 2017, of $2.15 per share. The acquisition primarily consisted of the existing customer relationships and represents further expansion of our verification and certification solutions into hydroponics/aquaponics and apiary spaces. We believe the total consideration paid approximates the fair value of the assets acquired. We have allocated the total consideration to our identifiable intangible assets to be amortized over an estimated useful life of 8 years. Sow Organic Acquisition On May 16, 2018, we acquired Sow Organic for $450,000 in cash and 217,654 shares of common stock of WFCF valued at approximately $433,100 based on the closing price of our stock on May 16, 2018, of $1.99 per share. We believe the transaction adds complementary solutions and services. Sow Organic’s software as a service (SaaS) model allows organic certification bodies to automate and accelerate new customer onboarding by converting traditional paper-based processes to digital format, resulting in lower costs, improved workflow management and increased productivity. Sow Organic’s unique design allows certification bodies to digitize any certification scheme. Likewise, the software affords producers and handlers a more efficient way to become certified and to digitally manage their records on an ongoing basis, including completing annual certification requirements fully online. We intend to further develop the organic business opportunity and collaborate on a broader rollout of the solution to other certification markets where the tool is equally suited to improve efficiencies and reduce costs in the certification process. This transaction further strengthens our intellectual property portfolio, which we believe represents a distinct competitive advantage for the Company. The following table summarizes the final fair values assigned to the assets and liabilities acquired in addition to the excess of the purchase price over the net assets acquired at the acquisition date. Measurement period adjustments were completed in 2018 and reflect new information obtained about facts and circumstances that existed as of the Acquisition Date. Accordingly, the carrying amounts were retrospectively adjusted as of May 16, 2018. The impact of the retrospective adjustments was not material to the Company’s results of operations or cash flows for the period from the Acquisition Date through September 30, 2018. Sow Organic, LLC May 16, 2018 (as reported) Adjustments May 16, 2018 (as adjusted) Software acquired $ 445,000 (289,000 ) $ 156,000 Indentifiable intangible assets: 143,754 (143,754 ) — Tradenames and trademarks — 48,000 48,000 Non-compete agreements — 84,000 84,000 Customer relationships — 162,000 162,000 Goodwill 294,377 138,754 433,131 Total consideration $ 883,131 $ 883,131 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. This acquisition did not materially affect the Company’s consolidated results of operations. JVF Consulting Acquisition On August 30, 2018, we acquired JVF Consulting, LLC (“Seller” or “JVF”) for $500,000 in cash and 158,437 shares of common stock of WFCF valued at approximately $315,300 based on the closing price of our stock on August 29, 2018, of $1.99 per share. We believe the transaction adds value to certain of our existing software solutions which are based on intellectual property built and owned by the Seller. JVF is currently the largest technology provider to our SureHarvest division. With this acquisition, WFCF will control all of the intellectual property associated with its current Software as a Service (SaaS) offerings. Additionally, WFCF will employ three of the Seller’s employees who enhance our ability to address new markets and services with our SaaS Solutions. We believe the impacts on proforma revenue and earnings are immaterial. Management has not yet completed the fair values of the identifiable intangible assets. The following table summarizes the preliminary purchase price allocated fair values assigned to the assets acquired in addition to the excess of the purchase price over the net assets acquired: JVF Consulting, LLC August 30, 2018 Software acquired $ 250,000 Indentifiable intangible assets: Tradenames and trademarks 5,290 Non-compete agreements 10,000 Customer relationships 100,000 Goodwill 450,000 Total consideration $ 815,290 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. Out of Period Adjustment For the periods prior to December 31, 2017, the Company discovered that a discount for the lack of marketability related to certain lock-up provisions within our purchase agreements had not been considered for stock issued in which the restriction exceeds one-year. The company evaluated the impact of not recording the discount in the Consolidated Balance Sheet in the historical period presented and concluded that the effect was immaterial. We corrected the immaterial error in second quarter 2018 by recording an out-of-period adjustment for approximately $321,900 to decrease goodwill and additional paid-in-capital. In evaluating the adjustment, we referred to the SEC Staff Accounting Bulletin (SAB) No. 99, including SAB Topic 1.M, which provides guidance on the assessment of materiality and states that “the omission or misstatement of an item in a financial report is material if, in the light of surrounding circumstances, the magnitude of the item is such that it is probable that the judgment of a reasonable person relying upon the report would have been changed or influenced by the inclusion or correction of the item.” We also referred to SAB 108 for guidance on considering the effects of prior year misstatements when quantifying misstatements in current year financial statements and the assessment of materiality. Our analysis of the materiality of the adjustment was performed by reviewing quantitative and qualitative factors. We determined based on this analysis that the adjustment was not material to the current period and any prior periods. |
Basic and Diluted Net Income pe
Basic and Diluted Net Income per Share | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income per Share | Note 3 – 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 restricted stock awards 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: Three months ended Nine months ended 2018 2017 2018 2017 Basic: Weighted average shares outstanding 24,900,919 24,705,934 24,756,262 24,673,080 Diluted: Weighted average shares outstanding 24,900,919 24,705,934 24,756,262 24,673,080 Weighted average effects of dilutive securities 173,558 180,213 182,437 161,851 Total 25,074,477 24,886,147 24,938,699 24,834,931 Antidilutive securities: 202,750 94,000 202,750 94,000 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. |
Intangible and Other Assets
Intangible and Other Assets | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible and Other Assets | Note 4 – Intangible and Other Assets The following table summarizes our intangible and other assets: September 30, December 31, Estimated Intangible assets subject to amortization: Tradenames and trademarks $ 335,597 $ 282,307 2.5 - 15.0 years Accreditations 85,395 97,706 5.0 years Customer relationships 3,346,551 3,084,551 8.0 - 15.0 years Beneficial lease arrangement — 120,200 11.0 years Patents 970,100 970,100 4.0 years Non-compete agreements 94,000 — 5.0 years 4,831,643 4,554,864 Less accumulated amortization 1,433,839 1,084,879 3,397,804 3,469,985 Tradenames/trademarks (not subject to amortization) 465,000 465,000 3,862,804 3,934,985 Investment in Progressive Beef, LLC (at cost) 991,115 — Other assets 13,545 13,545 Intangible and other assets: $ 4,867,464 $ 3,948,530 Beneficial Lease Arrangement In connection with our acquisition of ICS in 2012, we recorded a beneficial lease arrangement of $120,200 related to a 2,300-square foot building located on approximately ¾ acre in Medina, North Dakota. On January 12, 2018, the Company purchased the 2,300-square foot building and terminated the lease. The net book value of the beneficial lease arrangement at December 31, 2017 was approximately $56,500 and was fully amortized in January 2018. Investment in Progressive Beef, LLC On August 9, 2018, the Company purchased a ten percent membership interest in Progressive Beef, LLC (“Progressive Beef”) for an aggregate purchase price of approximately $991,000. The purchase price was payable in cash of $900,000 and 50,340 shares of common stock of WFCF valued at approximately $91,100 based upon the closing price of our stock on August 9, 2018, of $1.81 per share. Where Food Comes From is the primary certifier for Progressive Beef. On September 24, 2018, the Company received dividend income of $100,000 from Progressive Beef representing a distribution of their earnings. The income is reflected within the Other Income section of the Company’s Consolidated Statement of Income for the quarter and nine months ended September 30, 2018. The investment is accounted for as a financial instrument under ASC 321 and the Company has elected to apply the practical expedient to value the investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 9 Months Ended |
Sep. 30, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Current Liabilities | Note 5 – Accrued Expenses and Other Current Liabilities The following table summarizes our accrued expenses and other current liabilities as of: September 30, December 31, Income and sales taxes payable $ 24,281 $ 255,099 Payroll related accruals 660,114 148,408 Professional fees and other expenses 220,386 80,326 Deferred rent expense 140,961 71,296 $ 1,045,742 $ 555,129 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2018 | |
Notes Payable [Abstract] | |
Notes Payable | Note 6 – Notes Payable Notes Payable consist of the following: September 30, December 31, Vehicle note $ 44,836 $ 51,898 Less current portion of notes payable and other long-term debt (9,986 ) (9,446 ) Notes payable and other long-term debt $ 34,850 $ 42,452 In September 2017, we entered into a note payable of $54,165 for the purchase of a vehicle. Interest and principal payments are due in equal monthly installments of $1,087 over five years beginning October 2017. This note bears an interest rate of 7.44% per annum and is fully secured by the vehicle. Unison Revolving Line of Credit The Company has a revolving line of credit (“LOC”) agreement which matures April 12, 2020. The LOC provides for $75,050 in working capital. The interest rate is at the Wall Street Journal prime rate plus 1.50% 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 |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Note 7 – 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 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 at the date of grant 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. For the periods presented, all stock-based compensation expense was classified as a component within selling, general and administrative expense in the Company’s consolidated statements of income. The amount of stock-based compensation expense is as follows: Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Stock options $ 28,445 $ 14,687 $ 64,820 $ 44,100 Restricted stock awards 16,773 26,480 60,419 86,537 Total $ 45,218 $ 41,167 $ 125,239 $ 130,637 On March 8, 2018, the Company awarded stock options to purchase 25,000 shares of the Company’s common stock at an exercise price of $2.55 per share to one of our business consultants. On July 9, 2018, the Company awarded stock options to purchase 70,750 shares of Company common stock to all eligible full-time employees, excluding the executive officers. The grant-date exercise price is $1.80 per share. In connection with our acquisition of JVF Consulting, on August 29, 2018, we awarded stock options to a new employee to purchase 10,000 shares of the Company’s common stock at an exercise price of $1.99 per share. The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions: 2018 2017 Number of options awarded to purchase common shares 105,750 None Risk-free interest rate 2.6 - 2.8% N/A Expected volatility 149.3% - 154.3% N/A Assumed dividend yield N/A N/A Expected life of options from the date of grant 9.8 years N/A 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 Unvested Total 2018 (remaining three months) $ 31,686 $ 5,958 $ 37,644 2019 121,749 15,674 137,423 2020 69,154 4,251 73,405 2021 28,071 706 28,777 $ 250,660 $ 26,589 $ 277,249 Equity Incentive Plans Our 2016 Equity Incentive Plan (the “Equity Incentive Plan”) provides for the issuance of stock-based awards to employees, officers, directors and consultants. The Plan permits 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. Stock Option Activity Stock option activity under our Equity Incentive Plan 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, December 31, 2017 266,585 $ 1.23 $ 1.22 6.06 $ 462,508 Granted 105,750 $ 2.00 $ 1.96 9.71 $ — Exercised — $ — $ — — $ — Expired/Forfeited (5,334 ) $ 1.87 $ 1.86 6.39 $ — Outstanding, September 30, 2018 367,001 $ 1.44 $ 1.43 6.57 $ 391,117 Exercisable, September 30, 2018 199,913 $ 1.00 $ 1.01 4.40 $ 299,076 Unvested, September 30, 2018 167,088 $ 1.96 $ 1.93 9.16 $ 92,041 The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on September 30, 2018 and the exercise price for the in-the-money options) that would have been received by the option holders if all the in-the-money options had been exercised on September 30, 2018. Restricted Stock Activity Restricted stock activity under our Equity Incentive Plan is summarized as follows: Weighted avg. Number of grant date options fair value Non-vested restricted shares, December 31, 2017 99,000 $ 2.56 Granted 5,000 $ 2.55 Vested (74,000 ) $ 2.63 Forfeited — $ — Non-vested restricted shares, September 30, 2018 30,000 $ 2.38 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 8 – Income Taxes On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs, among other things. The Company is subject to the provisions of the FASB ASC 740-10, Income Taxes, which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate change was enacted. Due to the complexities involved in accounting for the recently enacted Tax Act, the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 118 requires that the Company include in its financial statements the reasonable estimate of the impact of the Tax Act on earnings to the extent such estimate has been determined. Pursuant to the SAB118, the Company is allowed a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The final impact on the Company from the Tax Act’s transition tax legislation may differ from the aforementioned estimates due to the complexity of calculating and supporting with primary evidence. Such differences could be material, due to, among other things, changes in interpretations of the Tax Act, future legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition tax’s reasonable estimate. The Company has implemented the U.S. Tax Act and does not expect any material changes related to the final impact from implementation. The Company’s subsidiary, SureHarvest, is a California limited liability company (“LLC”). As an LLC, management believes SureHarvest is not subject to income taxes, and such taxes are the responsibility of the respective members. The Company is not providing for income taxes for the 40% interest owned by unrelated members of SureHarvest. The provision or benefit for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. For the three months ended September 30, 2018 we recorded income tax expense of $169,000 compared to $199,000 for the 2017 period. For the nine months ended September 30, 2018 we recorded income tax expense of $257,000 compared to $150,000 for the 2017 period. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 9 – 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 The Move, LLC 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. In August 2017, the Company amended its lease agreement with The Move, LLC to provide for an additional 7,700 square feet of office space commencing on December 1, 2017. Total rental payments beginning December 1, 2017 increased from $18,000 to approximately $35,100 per month. The rental payments include common area charges and are subject to annual increases 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 is included in accrued expenses and other current liabilities on the consolidated balance sheet. Prior to 2018, the Company recorded leasehold improvements of approximately $425,000, which included approximately $163,000 in lease incentives. During the nine months ended September 30, 2018, the Company has recorded an additional $370,500 in leasehold improvements in connection with the August 2017 amended lease agreement, which included approximately $230,200 in lease incentives to build out the new additional square footage. Leasehold improvements are included in property and equipment on the consolidated balance sheets. 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 2017, the Company entered into a new lease agreement for our Urbandale, Iowa office space. The lease is for a period of two years and expires on August 31, 2019. Rental payments are approximately $2,900 per month, which includes common area charges, and are subject to annual increases over the term of the lease. The Company also owns approximately ¾ acre on which a 2,300-square foot building is located in Medina, North Dakota. Until January 12, 2018, the Company leased space in this building under a five-year lease with an expiration date of March 1, 2018. Under the lease, On January 12, 2018, the Company purchased the 2,300-square foot building and terminated the lease. The purchase price of approximately $135,600 was funded by cash on hand. 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, 2018 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 was approximately $600 and the lease agreement was month-to-month. We ceased using the Modesto location in July 2018. In connection with our acquisition of JVF, we added one additional location in Pleasanton, California. The lease expires November 30, 2018. Rental payments are approximately $2,200 per month. In addition to primary rent, this lease requires additional payments for operating costs and other common area maintenance costs. We are currently researching new rental spaces for the SureHarvest and JVF businesses to jointly occupy. As of September 30, 2018, future minimum lease payments for all operating leases are as follows: Years ended December 31st Total 2018 (remaining three months) 125,957 2019 476,165 2020 465,187 2021 479,143 2022 493,517 Thereafter 4,891,163 Total lease commitments 6,931,132 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. We are not aware of any legal actions currently pending against us. Contingently redeemable non-controlling interest Contingently redeemable non-controlling interest on our consolidated balance sheet represents the non-controlling interest related to the SureHarvest acquisition, in which the non-controlling interest holder, at its election, can require the Company to purchase its 40% investment in SureHarvest. The table below reflects the activity of the contingently redeemable non-controlling interest at September 30, 2018: Balance, January 1, 2018 $ 1,574,765 Net loss attributable to non-controlling interest in SureHarvest for the year to date period ended (53,261 ) Balance, September 30, 2018 $ 1,521,504 The contingently redeemable non-controlling interest has been adjusted to the greater of the carrying value or redemption value as of each period end. |
Segments
Segments | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Segments | Note 10 – Segments With each acquisition, we assess the need to disclose discrete information related to our operating segments. Because of the similarities of certain of our acquisitions that provide certification and verification services, we aggregate operations into one verification and certification services reportable segment. The factors considered in determining this aggregated reporting segment include the economic similarity of the businesses, the nature of services provided, production processes, types of customers and distribution methods. The Company’s chief operating decision maker (the Company’s CEO) allocates resources and assesses the performance of its certification and verification services activities as one segment, which includes product sales. Additionally, the Company determined that it also has a software sales and related consulting services segment. This segment includes software license, maintenance, support and software-related consulting service revenues. Management makes decisions, measures performance, and manages the business utilizing internal reporting operating segment information. Performance of operating segments are based on net sales, gross profit, selling, general and administrative expenses and most importantly, operating income. The Company eliminates intercompany transfers between segments for management reporting purposes. The following table shows information for reportable operating segments: Three months ended September 30, 2018 Three months ended September 30, 2017 Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Revenues: Verification and certification service revenue $ 3,906,996 $ — $ 3,906,996 $ 3,672,587 $ — $ 3,672,587 Product sales 783,303 — 783,303 687,235 — 687,235 Software license, maintenance and support services revenue — 208,541 208,541 — 243,186 243,186 Software-related consulting service revenue — 226,538 226,538 — 131,427 131,427 Total revenues $ 4,690,299 $ 435,079 $ 5,125,378 $ 4,359,822 $ 374,613 $ 4,734,435 Costs of revenues: Costs of verification and certification services 2,098,462 — 2,098,462 2,096,907 — 2,096,907 Costs of products 489,149 — 489,149 410,309 — 410,309 Costs of software license, maintenance and support services — 183,942 183,942 — 141,902 141,902 Costs of software-related consulting services — 117,303 117,303 — 43,981 43,981 Total costs of revenues 2,587,611 301,245 2,888,856 2,507,216 185,883 2,693,099 Gross profit 2,102,688 133,834 2,236,522 1,852,606 188,730 2,041,336 Selling, general and administrative expenses 1,545,512 273,507 1,819,019 1,308,442 283,155 1,591,597 Segment operating income (loss) $ 557,176 $ (139,673 ) $ 417,503 $ 544,164 $ (94,425 ) $ 449,739 Nine months ended September 30, 2018 Nine months ended September 30, 2017 Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Revenues: Verification and certification service revenue $ 10,210,947 $ — $ 10,210,947 $ 9,152,520 $ — $ 9,152,520 Product sales 1,633,509 — 1,633,509 1,226,141 — 1,226,141 Software license, maintenance and support services revenue — 759,301 759,301 — 532,684 532,684 Software-related consulting service revenue — 580,731 580,731 — 399,120 399,120 Total revenues $ 11,844,456 $ 1,340,032 $ 13,184,488 $ 10,378,661 $ 931,804 $ 11,310,465 Costs of revenues: Costs of verification and certification services 5,399,626 — 5,399,626 4,928,139 — 4,928,139 Costs of products 1,035,094 — 1,035,094 743,308 — 743,308 Costs of software license, maintenance and support services — 489,887 489,887 — 362,139 362,139 Costs of software-related consulting services — 280,310 280,310 — 182,718 182,718 Total costs of revenues 6,434,720 770,197 7,204,917 5,671,447 544,857 6,216,304 Gross profit 5,409,736 569,835 5,979,571 4,707,214 386,947 5,094,161 Selling, general and administrative expenses 4,456,352 837,609 5,293,961 3,670,771 1,102,675 4,773,446 Segment operating income (loss) $ 953,384 $ (267,774 ) $ 685,610 $ 1,036,443 $ (715,728 ) $ 320,715 |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 9 Months Ended |
Sep. 30, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | Note 11 – Supplemental Cash Flow Information Nine months ended September 30, 2018 2017 Cash paid during the year: Interest expense $ 3,755 $ 603 Income taxes $ 418,965 $ 184,440 Non-cash investing and financing activities: Common stock issued in connection with acquisition of Sow Organic $ 433,131 $ — Common stock issued in connection with investment in Progressive Beef $ 91,115 $ — Common stock issued in connection with acquisition of JVF Consulting $ 315,291 $ — Equipment acquired under a capital lease $ 19,809 $ 18,033 Lease incentive obligation $ 230,220 $ — Common stock issued in connection with acquisition of A Bee Organic $ — $ 98,221 Common stock issued for acquisition-related consulting fees $ — $ 25,000 Vehicle acquired under note payable $ — $ 54,165 |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | Note 12 – Revenue from Contracts with Customers Impact of ASC 606 Adoption On January 1, 2018, the Company adopted Accounting Standards Update, Topic 606, “Revenue from Contracts with Customers” (ASC 606) using the modified retrospective method of transition. Under this method of transition, we applied ASU 606 to all new contracts entered into on or after January 1, 2018 and all existing contracts for which all (or substantially all) of the revenue attributable to a contract had not been recognized under legacy revenue guidance as of January 1, 2018. ASU 606 supersedes nearly all existing revenue recognition guidance under U.S. GAAP and includes a five-step process to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The impact of adoption on our current period results is as follows: Nine months ended September 30, 2018 Under ASC 606 Under ASC 605 Increase / (Decrease) Revenues: Verification and certification service revenue $ — $ 114,900 $ (114,900 ) Costs and expenses: Cost of verification and certification services $ — $ 114,900 $ (114,900 ) Gross profit $ — $ — $ — Net income (loss) $ — $ — $ — Retained earnings $ — $ — $ — Changes to verification and certification service revenue and costs of verification and certification services are due to the conclusion that fees collected on behalf of the Non-GMO Project related to the Company’s Non-GMO verification services should be excluded from the transaction price (and, thus, revenue), as these amounts are collected on behalf of a third party. This represents a change from our accounting practice under legacy revenue guidance of presenting these amounts on a gross basis in verification and certification service revenue, with an offsetting amount presented as an expense in costs of verification and certification services. Revenue Recognition Verification and Certification Segment We offer a range of products and services to maintain identification, traceability, and verification systems. We conduct both on-site and desk audits to verify that claims being made about livestock, food, other high-value specialty crops and agricultural products are accurate. 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 and agricultural supply chains. Verification and certification service revenue primarily consists of fees charged for verification audits and other verification services that the Company performs for customers. A more detailed summary of our verification and certification services is included in the subsections below. Animal Verification and Certification Services Our animal verification and certification services contracts are generally structured in one of the following ways: (i) we commit to perform the required number of animal audits to verify a customer’s compliance with a standard or claim, or (ii) we commit to perform animal audit services at a fixed price by site or location type as requested by our customer during an annual period. These contract structures are discussed in more detail in the subsections below. Contract to Provide Required Number of Animal Audit Services For certain of our animal verification and certification services, we commit to perform the required number of location or site audits within our customer’s supply chain to verify customer’s compliance with a contractually-specified standard or claim. Each location or site audit is typically very short-term in nature, with a typical duration of one to two weeks. Upon completion of an audit, we provide the customer with an audit verification report for the specific site or location that was audited. Payment is made by customer upon completion of each site or location audit. We generally enter into revenue contracts with a one-year term. Our customers generally have the right to terminate the contract without prejudice with thirty days’ written notice. We have determined that, as a result of the termination provisions present in these contracts, the accounting contract term is a thirty-day period, with each thirty-day time increment representing a separate accounting contract under ASC 606. Furthermore, we have concluded that there is a single performance obligation that is a series comprised of each distinct location or site audit performed. Our customers are charged a standard daily rate for the provision of an audit based on scale of site operations and geographical location. Consideration attributable to each audit within the series is variable, as the number of days required to complete each audit is not known until performance of that audit occurs. We have concluded that it is appropriate to allocate variable consideration (that is, the number of days required to complete an audit) to each audit within the series. This is because the consideration that we earn for each audit relates specifically to our efforts to transfer to our customer that discrete audit, and the resulting audit opinion or verification report, for that specified site or location, and this allocation is consistent with the allocation objective as defined in ASC 606. As a result, instances in which the Company evaluates and applies the constraint on variable consideration are immaterial. We further concluded that over-time recognition is appropriate because: (i) our performance of audits does not create an asset with an alternative use, as the audit and related verification report relates to facts and circumstances that are specific to each customer site or location (that is, there is a practical limitation on our ability to readily direct the asset to another customer) and (ii) we have an enforceable right to payment, inclusive of a reasonable profit, for performance completed to date. We utilize an input method to measure over-time progress of each audit within the series based on the number of audit days performed. We do, however, note that there are instances in which we only have an enforceable right to payment upon completion of an audit, and thus, over-time recognition is not permitted. For these contracts, revenue is recognized at the point in time at which an audit is completed. This does not result in a significant difference in the timing of revenue recognition (as compared to those audits that are recognized over time) due to the very short-term duration of an audit. Our customer may also have the option to purchase incremental review services (for example, an investigative audit or video review services) that are unrelated to the audit services to verify compliance with a specified standard or claim. The incremental review services are also typically very short-term in nature (that is, one to two weeks). We have concluded that these optional purchases do not reflect a material right under ASC 606 because the incremental review services are performed at standard pricing that would be charged to other similarly situated customers. Upon customer request for an incremental review service, we believe that our customer has made a discrete purchasing decision that should be treated as a separate accounting contract under ASC 606. We charge a fixed fee for the incremental review service, and thus, upon customer request, we are entitled to fixed consideration for that service under ASC 606. We concluded that over-time revenue recognition is appropriate for incremental review services because: (i) our performance of incremental review services does not create an asset with an alternative use because that review service, and the associated customer deliverable, relates to facts and circumstances that are specific to each customer site or location (that is, there is a practical limitation on our ability to readily direct the asset to another customer) and (ii) we have an enforceable right to payment, inclusive of a reasonable profit, for performance completed to date on incremental review services. We utilize a time-based input method to measure progress toward complete satisfaction of an incremental review service, which is based on the number of hours performed on the incremental review service relative to the total number of hours required to complete that review service. As previously mentioned, our incremental review services are typically completed within one to two weeks of a customer request. Contract to Provide Animal Audit Services at Customer Request Other animal verification and certification services contracts are structured such that we commit to perform audit services at a fixed price by site or location type as requested by our customer during an annual period. Performance of an audit typically occurs within a one to two-week period. We invoice our customer upon completion of an audit, and payment is due from customer within thirty days or less of receipt of invoice. Under this contract structure, the customer is, in effect, provided a pricing list for animal audit services, and pricing is effective over a one-year period. We have concluded that enforceable rights and obligations do not arise until a customer actually engages us to perform an audit service documented in the pricing list; therefore, each customer request represents a purchasing decision that is a separate accounting contract under ASC 606. We note that the termination provisions specified in our pricing lists vary. In certain instances, a customer may only have the right to terminate in the event of non-performance. Alternatively, in other contracts, a customer may have the right to terminate without prejudice at any time or with thirty days’ written notice. However, regardless of the termination provision specified, we have concluded that the accounting contract term is equal to the duration of the requested audit service (that is, the termination provisions generally do not affect the accounting contract term for each requested audit service). Upon a customer’s request for an audit service, consideration is fixed, as we charge the customer a fixed fee by audit type over the annual period per the pricing list. We concluded that over-time revenue recognition is appropriate for a requested audit service because: (i) our performance of the requested audit service does not create an asset with an alternative use as that audit, and the associated audit report, relate to facts and circumstances that are specific to each customer site or location (that is, there is a practical limitation on our ability to readily direct the asset to another customer) and (ii) we have an enforceable right to payment, inclusive of a reasonable profit, for performance completed to date on a requested audit. A time-based input method is utilized to measure progress toward complete satisfaction of an audit based on the number of hours performed on that audit relative to the total number of hours expected to be required to complete the audit. As previously mentioned, our audit services are typically completed within one to two weeks of a customer request. Other Considerations for Animal Certification and Verification Services In connection with the provision of on-site audits related to animal certification and verification services, reimbursable expenses are incurred and billed to customers, and such amounts are recognized on a gross basis as both revenue and cost of revenue. Any amounts collected on behalf of a third party and remitted in full to that third party are excluded from the transaction price and, thus, revenue. Crop and Other Processed Product Verification and Certification Services Third party crop and other processed product audits are generally structured such that we commit to perform an independent audit to verify that food producers and/or farmers comply with certain standards. We generally provide verification services related to organic, Non-GMO and gluten-free standards. Depending on the crop or product type, verification audit activities may take two months to one year to complete. During this assessment period, various integrated audit activities and/or input reviews are performed in accordance with the regulations specified by the relevant standard. The fee structure is such that customers pay an annual assessment fee for a crop or other processed product to verify compliance with the specified standard. This fee is payable upfront on a nonrefundable basis. Our customers can typically terminate a crop or other processed product audit at any time without prejudice. However, given the nonrefundable upfront payment structure for the annual assessment service, we have concluded that the contract term is one year. We record the upfront payment made by customer for the annual assessment service as deferred revenue. The audit activities and input reviews required in the provision of an annual assessment are not distinct under ASC 606, and consequently, we account for an annual assessment as a single integrated performance obligation. For certain of our third-party crop and other processed product audits, the annual assessment fee is fixed for the annual period. In other scenarios, the annual assessment fee may be variable due to increased review activities required for incremental inputs to a crop or processed product identified through the assessment process. At the time that an incremental input is identified, which generally occurs in the early stages of an annual assessment, the incremental consideration for the provision of review services related to that incremental input also becomes known. We allocate the transaction price derived from the annual assessment fee to the single integrated performance obligation for that annual assessment. Revenue related to the annual assessment is recognized over time in accordance with ASC 606. This is because the annual assessment service does not create an asset with an alternative use, as it relates to facts and circumstances that are specific to a customer’s crop or processed product. Further, we have an enforceable right to payment for performance completed to date on the annual assessment due to the nonrefundable upfront payment made by customer. We utilize an input method to measure progress toward satisfaction of the annual assessment based on the percentage of activities/phases or input reviews completed under the annual assessment. As it relates to the upfront payment for the annual assessment, we have utilized the practical expedient that exempts us from adjusting consideration for the effects of a significant financing component when we expect that the period between customer payment and the provision of the related service is one year or less. In certain contracts, an independent third-party inspection may be required for a site or location in our customer’s supply chain in accordance with the regulations for a specified standard. An inspection is performed by an independent third-party inspector, and the customer is charged an hourly rate for these inspection services. Under this scenario, a separate accounting contract arises upon initiation and performance of an inspection, and we typically invoice our customer for the inspection upon completion of the inspection service. Given that customer has the ability to terminate at any time without prejudice, we have concluded that the contract term for each inspection ends as control of an inspection service transfers. Inspections are generally short-term in nature with a term ranging from a few days to two weeks. We have further determined that inspections are distinct from an annual assessment. Consideration attributable to an inspection is variable, as the inspector is only able to provide a high-level estimate of the cost of the inspection based on the inspector’s hourly rate until the inspector is at the relevant producer/supplier site to determine the time and level of effort required to complete the inspection. Given the very short-term nature of an inspection, variability related to an inspection generally resolves itself within a reporting period. However, we are typically required by certain regulations to provide an inspection cost estimate to our customer, and, if required, we utilize that estimate as our estimate of variable consideration. The cost estimate is generally derived from the cost to perform the prior-year inspection for that specific customer site or location or, when required, the historical cost to provide an inspection for a comparable site or location. In our experience, the historical cost of inspections has been predictive of the future cost of an inspection. Other Considerations for Crop and Other Processed Product Verification Services Reimbursable expenses incurred in the provision of an annual assessment or required inspection are billed to our customers, and such amounts are recognized on a gross basis as both revenue and cost of revenue. In addition, any amounts collected on behalf of a third party and remitted in full to that third party are excluded from the transaction price and, thus, revenue. Product Sales Product sales are primarily generated from the sale of cattle identification ear tags. Each customer purchase request represents a purchasing decision made by customer. As such, enforceable rights and obligations (and, thus, a separate accounting contract under ASC 606) arise at the time a customer submits its purchase request to us. At the time of request, we are entitled to fixed consideration, as the sales quantity and related price of the product is known. All of our customers are charged the same fixed price per tag. Revenue for product sales is recognized upon delivery of the goods to customer, at which point title, custody and risk of loss transfer to the customer. We typically deliver product to the customer within a few days of customer’s sales request. At the time of delivery, we invoice our customer for the related product sales and record invoiced amounts to accounts receivable. Payment is typically due by customer upon receipt of invoice. In relation to our product sales, the sales taxes collected from customers and remitted to government authorities are excluded from revenue. Additionally, we do not typically provide right of return or warranty on product sales. Software Sales and Related Consulting Segment We predominately offer software products via a SaaS model, which is an annual subscription based model. Support services are generally included in the subscription. We also provide web hosting services on an annual basis to all of our customers in conjunction with their software subscription. Customers have the ability to terminate without prejudice upon thirty days’ written notice; however, the subscription fee, inclusive of maintenance and support services, and the web hosting fee are paid upfront by the customer on a nonrefundable basis. Consequently, we have concluded that the contract term for the annual software subscription and web hosting services is one year. We have determined that a software license subscription and the related hosting service should be accounted for as a service transaction, as we provide the functionality of our software through the hosting arrangement. The SaaS arrangement provides customers with unlimited access to our software and, thus, is accounted for as a series of distinct daily service periods that provide substantially the same service (that is, continuous access to the hosted software) each day during the annual contract term. Further, the provision of basic technical support services also represents a stand ready obligation that is a series of distinct daily service periods that provide substantially the same service (that is, access to our technical support infrastructure) during the annual contract term. Because the basic technical support services and SaaS each represent performance obligations that are a series of distinct daily service periods, we have elected to combine these performance obligations. We are entitled to fixed consideration for the software license subscription, inclusive of support services, and the related hosting service. The software license subscription and hosting fees in our contracts represent the standalone selling price for that related service. This is because the fees charged for the software license subscription and hosting service represent the software license subscription and hosting service fees that are charged to other customers with a similar level of data loaded into the software (regardless of whether that customer contracts for professional services). Accordingly, the software license subscription and hosting fees are allocated to the combined SaaS performance obligation. We recognize revenue related to the SaaS arrangement over time because a customer simultaneously receives and consumes the benefit from the provision of access to the hosted software over the annual subscription period. Accordingly, we utilize a time-based output measure of progress that results in a straight-line attribution of revenue. That is, revenue related to the combined SaaS obligation should be recognized daily on a straight-line basis over the one-year subscription term, as this reflects the direct measurement of value to a customer of the provision of access to the software via hosting each day. As it relates to the upfront payment for the software subscription and hosting service, we have utilized the practical expedient that exempts us from adjusting consideration for the effects of a significant financing component when we expect that the period between customer payment and the provision of the related service is one year or less. In addition, we record the upfront payment made by customer for the annual assessment service as deferred revenue. In some of our SaaS contracts, we also provide software-related consulting services to our customers during an annual software subscription period. Consulting services fees are derived from a standard rate card by employee level, and we invoice for consulting services monthly on a time incurred basis. Due to the termination provisions present in our SaaS contracts, our customers have an in-substance renewal decision each month for further consulting services (that is, via their decision not to terminate the contract each month). Accordingly, the contract term for consulting services is on a month-to-month basis within the annual subscription period. We have concluded that consulting services are distinct from the SaaS arrangement. To the extent that consulting services result in a software enhancement or new functionality, we have determined that those consulting services are still distinct because added features typically provide new, discrete capabilities with independent value to a customer and a customer accesses the SaaS in a single-tenant architecture. Further, additional features and functionality are often made available to a customer substantially after the “go-live” date of the software (via the hosting service). As a result, our software-related consulting services represent distinct performance obligations. We recognize revenue over time in accordance with ASC 606. This is because our performance does not create an asset with an alternative use, as consulting services, and, if applicable, any related software enhancements, are highly tailored to the farming industry specific to the given customer, and we have an enforceable right to payment, inclusive of profit, for performance completed to date. As a result, for our consulting services, we have elected to utilize the practical expedient that allows us to recognize revenue in the amount to which we have a right to invoice, as we believe that we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date for the provision of consulting services. Other Significant Judgments Principal versus Agent Considerations Under certain of our verification and certification service contracts, a third-party inspector may be required to perform an independent inspection of a site or location within our customer’s supply chain in accordance with regulations of a certain standard or claim. In this scenario, we have concluded that we are the principal in the provision of inspection services to our customer, as we control the inspection service, and the related inspection report, before it is transferred to our customer. In accordance with this conclusion, we present revenue related to inspections on a gross basis, with customer payment for an inspection presented as revenue and the inspection cost paid to the third-party inspector presented as an expense. In addition, we utilize a third party to provide web hosting services in the provision of our SaaS arrangements. In this scenario, we are primarily responsible for fulfilling the promise to provide web hosting services to the customer, and we establish the fee that the customer is charged for the web hosting services. Consequently, we have also concluded that we are the principal in the provision of web hosting services under our SaaS arrangements. As such, we present revenue on a gross basis, with consideration received from our customer for the web hosting service recorded as revenue and the cost paid to the third party to provide those web hosting services recorded as an expense. Disaggregation of Revenue We have identified four material revenue categories in our business: (i) verification and certification service revenue, (ii) product sales, (iii) software license, maintenance and support services revenue and (iv) software-related consulting service revenue. Revenue attributable to each of our identified revenue categories is disaggregated in the table below. Three months ended September 30, 2018 Nine months ended September 30, 2018 Revenues: Verification Software Consolidated Verification Software Consolidated Verification and certification service revenue Product sales $ 3,906,996 $ — $ 3,906,996 $ 10,210,947 $ — $ 10,210,947 Software license, maintenance and support services revenue 783,303 — 783,303 1,633,509 — 1,633,509 Software-related consulting service revenue — 208,541 208,541 — 759,301 759,301 Total revenues — 226,538 226,538 — 580,731 580,731 $ 4,690,299 $ 435,079 $ 5,125,378 $ 11,844,456 $ 1,340,032 $ 13,184,488 Transaction Price Allocated to Remaining Performance Obligations We generally enter into revenue contracts with a one-year term. In certain instances, we have concluded that our contract term is less than one year because: (i) the termination provisions present in the contract impact the contract term under ASC 606 or (ii) a contract under ASC 606 arises at the time our customer requests the provision of a good or service that is delivered within or over a few days to a couple of weeks. As a result of our short-term contract structures, we have utilized the practical expedient in ASC 606-10-50-14 that exempts us from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. Contract Balances Under our animal verification and certification services contracts, we invoice customers once the performance obligation for the provision of a site or location audit has been satisfied, at which point payment is unconditional. In addition, any product sales are invoiced upon delivery to the customer, at which point payment is also unconditional. Accordingly, our animal verification and certification services contracts do not give rise to a contract asset under ASC 606; rather, invoiced amounts reflect accounts receivable. Under our crop and other processed product verification and certification services, a nonrefundable payment for an annual assessment of compliance with a standard is typically made by our customers upfront upon contract execution. That is, payment is made in advance of the provision of annual assessment services. Accordingly, we recognize deferred revenue upon receipt of the upfront payment from our customers for crop and other processed product audit assessment services. Revenue is subsequently recognized, and the related deferred revenue is reduced, over the one-year period during which assessment services are provided to the customer using the over-time measure of progress selected in accordance with ASC 606. To the extent that an inspection is required during the annual assessment period, we invoice customers once the performance obligation for the inspection has been satisfied, at which point payment is unconditional. As such, inspection services give rise to accounts receivable. Our software subscriptions, web hosting, and support services are paid by our customers upfront on a nonrefundable basis. That is, payment is made in advance of the provision of these services to our customers. As a result, we recognize deferred revenue upon receipt of the upfront payment from our customers for software subscriptions, web hosting and maintenance and support services. Revenue is subsequently recognized, and the related deferred revenue is reduced, on a straight-line basis during the annual contract term that these stand ready services are provided to customer. Software-related consulting services are invoiced monthly on a time incurred basis, at which point we have an enforceable right to payment for those services. Because payment is unconditional upon invoicing, our software-related consulting services are reflected as accounts receivable. As of September 30, 2018, and January 1, 2018, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $2,563,100 and $1,898,700, respectively. As of September 30, 2018, and January 1, 2018, deposits and deferred revenue from contracts with customers were approximately $976,900 and $851,200, respectively. The balance of these contract liabilities at the beginning of the period is expected to be recognized as revenue during 2018. Costs to fulfill a contract Prior to August 2018, we incurred a fixed cost, payable to JVF Consulting, LLC, a third-party provider, to perform set-up activities for new (or first-year) customers that contract for our software subscription and hosting services. As previously discussed in Note 2, on August 30, 2018, we acquired the JVF Consulting, which included three key employees. We concluded that those set-up activities performed by JVF did not transfer a good or service as defined in ASC 606 to our customers. We capitalize fixed set-up costs as an asset on the following basis: (i) the fixed set-up costs incurred relate specifically to a customer contract for our software subscription and hosting service, (ii) the fixed set-up costs incurred are expected to be recovered via provision of the software subscription and hosting service to that customer and (iii) the set-up costs generate or enhance resources of the Company by permitting us to provide software subscription and hosting services to our customer, which, in turn, generates revenues. Capitalized costs related to those set-up activities are amortized on a straight-line basis over the one-year license subscription and hosting period. The ending balance at September 30, 2018 of capitalized assets attributable to the set-up costs incurred to fulfill software subscription and hosting contracts was not material. No set-up costs related to our software subscription and hosting services were incurred for the nine months ended September 30, 2018. In addition, amortization of capitalized set-up costs for the three months ended September 30, 2018 was not material, and no impairment loss was incurred related to capitalized set-up costs for the nine months ended September 30, 2018. Commissions and other costs to obtain a contract are expensed as incurred as our contracts are typically completed in one year or less, and where applicable, we generally would incur these costs whether or not we ultimately obtain the contract. |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Schedule of acquisition | The following table summarizes the final fair values assigned to the assets and liabilities acquired in addition to the excess of the purchase price over the net assets acquired at the acquisition date. Measurement period adjustments were completed in 2018 and reflect new information obtained about facts and circumstances that existed as of the Acquisition Date. Accordingly, the carrying amounts were retrospectively adjusted as of May 16, 2018. The impact of the retrospective adjustments was not material to the Company’s results of operations or cash flows for the period from the Acquisition Date through September 30, 2018. Sow Organic, LLC May 16, 2018 (as reported) Adjustments May 16, 2018 (as adjusted) Software acquired $ 445,000 (289,000 ) $ 156,000 Indentifiable intangible assets: 143,754 (143,754 ) — Tradenames and trademarks — 48,000 48,000 Non-compete agreements — 84,000 84,000 Customer relationships — 162,000 162,000 Goodwill 294,377 138,754 433,131 Total consideration $ 883,131 $ 883,131 The following table summarizes the preliminary purchase price allocated fair values assigned to the assets acquired in addition to the excess of the purchase price over the net assets acquired: JVF Consulting, LLC August 30, 2018 Software acquired $ 250,000 Indentifiable intangible assets: Tradenames and trademarks 5,290 Non-compete agreements 10,000 Customer relationships 100,000 Goodwill 450,000 Total consideration $ 815,290 |
Basic and Diluted Net Income _2
Basic and Diluted Net Income per Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
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: Three months ended Nine months ended 2018 2017 2018 2017 Basic: Weighted average shares outstanding 24,900,919 24,705,934 24,756,262 24,673,080 Diluted: Weighted average shares outstanding 24,900,919 24,705,934 24,756,262 24,673,080 Weighted average effects of dilutive securities 173,558 180,213 182,437 161,851 Total 25,074,477 24,886,147 24,938,699 24,834,931 Antidilutive securities: 202,750 94,000 202,750 94,000 |
Intangible and Other Assets (Ta
Intangible and Other Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible and other assets | The following table summarizes our intangible and other assets: September 30, December 31, Estimated Intangible assets subject to amortization: Tradenames and trademarks $ 335,597 $ 282,307 2.5 - 15.0 years Accreditations 85,395 97,706 5.0 years Customer relationships 3,346,551 3,084,551 8.0 - 15.0 years Beneficial lease arrangement — 120,200 11.0 years Patents 970,100 970,100 4.0 years Non-compete agreements 94,000 — 5.0 years 4,831,643 4,554,864 Less accumulated amortization 1,433,839 1,084,879 3,397,804 3,469,985 Tradenames/trademarks (not subject to amortization) 465,000 465,000 3,862,804 3,934,985 Investment in Progressive Beef, LLC (at cost) 991,115 — Other assets 13,545 13,545 Intangible and other assets: $ 4,867,464 $ 3,948,530 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accrued expenses and other current liabilities | The following table summarizes our accrued expenses and other current liabilities as of: September 30, December 31, Income and sales taxes payable $ 24,281 $ 255,099 Payroll related accruals 660,114 148,408 Professional fees and other expenses 220,386 80,326 Deferred rent expense 140,961 71,296 $ 1,045,742 $ 555,129 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes Payable [Abstract] | |
Schedule of Notes Payable | Notes Payable consist of the following: September 30, December 31, Vehicle note $ 44,836 $ 51,898 Less current portion of notes payable and other long-term debt (9,986 ) (9,446 ) Notes payable and other long-term debt $ 34,850 $ 42,452 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock-based compensation expense | The amount of stock-based compensation expense is as follows: Three months ended September 30, Nine months ended September 30, 2018 2017 2018 2017 Stock options $ 28,445 $ 14,687 $ 64,820 $ 44,100 Restricted stock awards 16,773 26,480 60,419 86,537 Total $ 45,218 $ 41,167 $ 125,239 $ 130,637 |
Schedule of estimated fair value of stock options | The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions: 2018 2017 Number of options awarded to purchase common shares 105,750 None Risk-free interest rate 2.6 - 2.8% N/A Expected volatility 149.3% - 154.3% N/A Assumed dividend yield N/A N/A Expected life of options from the date of grant 9.8 years N/A |
Schedule of unrecognized compensation cost from unvested awards | 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 Unvested Total 2018 (remaining three months) $ 31,686 $ 5,958 $ 37,644 2019 121,749 15,674 137,423 2020 69,154 4,251 73,405 2021 28,071 706 28,777 $ 250,660 $ 26,589 $ 277,249 |
Schedule of stock option activity under Equity Incentive Plan | Stock option activity under our Equity Incentive Plan 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, December 31, 2017 266,585 $ 1.23 $ 1.22 6.06 $ 462,508 Granted 105,750 $ 2.00 $ 1.96 9.71 $ — Exercised — $ — $ — — $ — Expired/Forfeited (5,334 ) $ 1.87 $ 1.86 6.39 $ — Outstanding, September 30, 2018 367,001 $ 1.44 $ 1.43 6.57 $ 391,117 Exercisable, September 30, 2018 199,913 $ 1.00 $ 1.01 4.40 $ 299,076 Unvested, September 30, 2018 167,088 $ 1.96 $ 1.93 9.16 $ 92,041 |
Schedule of restricted stock activity under Equity Incentive Plan | Restricted stock activity under our Equity Incentive Plan is summarized as follows: Weighted avg. Number of grant date options fair value Non-vested restricted shares, December 31, 2017 99,000 $ 2.56 Granted 5,000 $ 2.55 Vested (74,000 ) $ 2.63 Forfeited — $ — Non-vested restricted shares, September 30, 2018 30,000 $ 2.38 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of operating leases future minimum lease payments | As of September 30, 2018, future minimum lease payments for all operating leases are as follows: Years ended December 31st Total 2018 (remaining three months) 125,957 2019 476,165 2020 465,187 2021 479,143 2022 493,517 Thereafter 4,891,163 Total lease commitments 6,931,132 |
Schedule of redeemable noncontrolling interest | The table below reflects the activity of the contingently redeemable non-controlling interest at September 30, 2018: Balance, January 1, 2018 $ 1,574,765 Net loss attributable to non-controlling interest in SureHarvest for the year to date period ended September 30, 2018 (53,261 ) Balance, September 30, 2018 $ 1,521,504 |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of operating segments | The following table shows information for reportable operating segments: Three months ended September 30, 2018 Three months ended September 30, 2017 Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Revenues: Verification and certification service revenue $ 3,906,996 $ — $ 3,906,996 $ 3,672,587 $ — $ 3,672,587 Product sales 783,303 — 783,303 687,235 — 687,235 Software license, maintenance and support services revenue — 208,541 208,541 — 243,186 243,186 Software-related consulting service revenue — 226,538 226,538 — 131,427 131,427 Total revenues $ 4,690,299 $ 435,079 $ 5,125,378 $ 4,359,822 $ 374,613 $ 4,734,435 Costs of revenues: Costs of verification and certification services 2,098,462 — 2,098,462 2,096,907 — 2,096,907 Costs of products 489,149 — 489,149 410,309 — 410,309 Costs of software license, maintenance and support services — 183,942 183,942 — 141,902 141,902 Costs of software-related consulting services — 117,303 117,303 — 43,981 43,981 Total costs of revenues 2,587,611 301,245 2,888,856 2,507,216 185,883 2,693,099 Gross profit 2,102,688 133,834 2,236,522 1,852,606 188,730 2,041,336 Selling, general and administrative expenses 1,545,512 273,507 1,819,019 1,308,442 283,155 1,591,597 Segment operating income (loss) $ 557,176 $ (139,673 ) $ 417,503 $ 544,164 $ (94,425 ) $ 449,739 Nine months ended September 30, 2018 Nine months ended September 30, 2017 Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated Revenues: Verification and certification service revenue $ 10,210,947 $ — $ 10,210,947 $ 9,152,520 $ — $ 9,152,520 Product sales 1,633,509 — 1,633,509 1,226,141 — 1,226,141 Software license, maintenance and support services revenue — 759,301 759,301 — 532,684 532,684 Software-related consulting service revenue — 580,731 580,731 — 399,120 399,120 Total revenues $ 11,844,456 $ 1,340,032 $ 13,184,488 $ 10,378,661 $ 931,804 $ 11,310,465 Costs of revenues: Costs of verification and certification services 5,399,626 — 5,399,626 4,928,139 — 4,928,139 Costs of products 1,035,094 — 1,035,094 743,308 — 743,308 Costs of software license, maintenance and support services — 489,887 489,887 — 362,139 362,139 Costs of software-related consulting services — 280,310 280,310 — 182,718 182,718 Total costs of revenues 6,434,720 770,197 7,204,917 5,671,447 544,857 6,216,304 Gross profit 5,409,736 569,835 5,979,571 4,707,214 386,947 5,094,161 Selling, general and administrative expenses 4,456,352 837,609 5,293,961 3,670,771 1,102,675 4,773,446 Segment operating income (loss) $ 953,384 $ (267,774 ) $ 685,610 $ 1,036,443 $ (715,728 ) $ 320,715 |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Schedule of supplemental cash flow information | Nine months ended September 30, 2018 2017 Cash paid during the year: Interest expense $ 3,755 $ 603 Income taxes $ 418,965 $ 184,440 Non-cash investing and financing activities: Common stock issued in connection with acquisition of Sow Organic $ 433,131 $ — Common stock issued in connection with investment in Progressive Beef $ 91,115 $ — Common stock issued in connection with acquisition of JVF Consulting $ 315,291 $ — Equipment acquired under a capital lease $ 19,809 $ 18,033 Lease incentive obligation $ 230,220 $ — Common stock issued in connection with acquisition of A Bee Organic $ — $ 98,221 Common stock issued for acquisition-related consulting fees $ — $ 25,000 Vehicle acquired under note payable $ — $ 54,165 |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of impact of adoption ASU606 | The impact of adoption on our current period results is as follows: Nine months ended September 30, 2018 Under ASC 606 Under ASC 605 Increase / (Decrease) Revenues: Verification and certification service revenue $ — $ 114,900 $ (114,900 ) Costs and expenses: Cost of verification and certification services $ — $ 114,900 $ (114,900 ) Gross profit $ — $ — $ — Net income (loss) $ — $ — $ — Retained earnings $ — $ — $ — |
Schedule of disaggregation of revenue | Revenue attributable to each of our identified revenue categories is disaggregated in the table below. Three months ended September 30, 2018 Nine months ended September 30, 2018 Revenues: Verification Software Consolidated Verification Software Consolidated Verification and certification service revenue Product sales $ 3,906,996 $ — $ 3,906,996 $ 10,210,947 $ — $ 10,210,947 Software license, maintenance and support services revenue 783,303 — 783,303 1,633,509 — 1,633,509 Software-related consulting service revenue — 208,541 208,541 — 759,301 759,301 Total revenues — 226,538 226,538 — 580,731 580,731 $ 4,690,299 $ 435,079 $ 5,125,378 $ 11,844,456 $ 1,340,032 $ 13,184,488 |
Business Acquisitions (Details)
Business Acquisitions (Details) - USD ($) | May 16, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | |||
Goodwill | $ 3,213,444 | $ 2,652,250 | |
Total consideration | $ 883,131 | ||
Adjustment [Member] | |||
Business Acquisition [Line Items] | |||
Goodwill | 138,754 | ||
Indentifiable intangible assets | (143,754) | ||
Sow Organic [Member] | |||
Business Acquisition [Line Items] | |||
Goodwill | 433,131 | ||
Total consideration | 883,131 | ||
Sow Organic [Member] | As Reported [Member] | |||
Business Acquisition [Line Items] | |||
Goodwill | 294,377 | ||
Indentifiable intangible assets | 143,754 | ||
Sow Organic [Member] | Software Acquired [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | 156,000 | ||
Sow Organic [Member] | Software Acquired [Member] | As Reported [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | 445,000 | ||
Sow Organic [Member] | Software Acquired [Member] | Adjustment [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | (289,000) | ||
Sow Organic [Member] | Tradenames and Trademarks [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | 48,000 | ||
Sow Organic [Member] | Tradenames and Trademarks [Member] | Adjustment [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | 48,000 | ||
Sow Organic [Member] | Noncompete Agreements [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | 84,000 | ||
Sow Organic [Member] | Noncompete Agreements [Member] | Adjustment [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | 84,000 | ||
Sow Organic [Member] | Customer Relationships [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | 162,000 | ||
Sow Organic [Member] | Customer Relationships [Member] | Adjustment [Member] | |||
Business Acquisition [Line Items] | |||
Indentifiable intangible assets | $ 162,000 |
Business Acquisitions (Details
Business Acquisitions (Details 1) - USD ($) | Aug. 30, 2018 | May 16, 2018 | Sep. 30, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 3,213,444 | $ 2,652,250 | ||
Total consideration | $ 883,131 | |||
JVF Consulting LLC [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 450,000 | |||
Total consideration | 815,290 | |||
JVF Consulting LLC [Member] | Software Acquired [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | 250,000 | |||
JVF Consulting LLC [Member] | Tradenames and Trademarks [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | 5,290 | |||
JVF Consulting LLC [Member] | Noncompete Agreements [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | 10,000 | |||
JVF Consulting LLC [Member] | Customer Relationships [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 100,000 |
Business Acquisitions (Detail_2
Business Acquisitions (Details Narrative) - USD ($) | May 16, 2018 | Aug. 30, 2017 | May 30, 2017 | Dec. 28, 2016 | Sep. 30, 2018 | Dec. 31, 2017 | May 31, 2018 | Aug. 29, 2017 |
Total consideration for acquisition | $ 883,131 | |||||||
Value of shares issued upon acquisition | $ 433,131 | |||||||
Decrease goodwill and additional paid-in-capital | $ 321,900 | |||||||
JVF Consulting [Member[ | ||||||||
Cash payments for acquisition | $ 500,000 | |||||||
Number of shares issued upon acquisition, shares | 158,437 | |||||||
Value of shares issued upon acquisition | $ 315,300 | |||||||
Share price (in dollars per share) | $ 1.99 | |||||||
A Bee Organic [Member] | ||||||||
Cash payments for acquisition | $ 150,000 | |||||||
Number of shares issued upon acquisition, shares | 45,684 | |||||||
Value of shares issued upon acquisition | $ 98,000 | |||||||
Share price (in dollars per share) | $ 2.15 | |||||||
Useful lives for intangible assets | 8 years | |||||||
SureHarvest Services LLC [Member] | ||||||||
Percentage of business acquired | 60.00% | |||||||
Total consideration for acquisition | $ 2,660,000 | |||||||
Cash payments for acquisition | $ 1,122,000 | |||||||
Number of shares issued upon acquisition, shares | 850,852 | |||||||
Value of shares issued upon acquisition | $ 1,534,900 | |||||||
Percentage of remaining ownership interest | 40.00% | 60.00% | ||||||
Assumed purchase price of remaining ownership interest | $ 8,000,000 | |||||||
Sow Organic [Member] | ||||||||
Total consideration for acquisition | 883,131 | |||||||
Cash payments for acquisition | $ 450,000 | |||||||
Number of shares issued upon acquisition, shares | 217,654 | |||||||
Value of shares issued upon acquisition | $ 433,100 | |||||||
Share price (in dollars per share) | $ 1.99 |
Basic and Diluted Net Income _3
Basic and Diluted Net Income per Share (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Basic: | ||||
Weighted average shares outstanding | 24,900,919 | 24,705,934 | 24,756,262 | 24,673,080 |
Diluted: | ||||
Weighted average effects of dilutive securities | 173,558 | 180,213 | 182,437 | 161,851 |
Total | 25,074,477 | 24,886,147 | 24,938,699 | 24,834,931 |
Antidilutive securities: | $ 202,750 | $ 94,000 | $ 202,750 | $ 94,000 |
Intangible and Other Assets (De
Intangible and Other Assets (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Intangible and other assets, gross | $ 4,831,643 | $ 4,554,864 |
Less accumulated amortization | 1,433,839 | 1,084,879 |
Intangible and other assets, net | 3,397,804 | 3,469,985 |
Tradenames/trademarks (not subject to amortization) | 465,000 | 465,000 |
Intangible and other assets, before other | 3,862,804 | 3,934,985 |
Investment in Progressive | 991,115 | |
Other assets | 13,545 | 13,545 |
Intangible and other assets, net | 4,867,464 | 3,948,530 |
Tradenames and Trademarks [Member] | ||
Intangible and other assets, gross | $ 335,597 | 282,307 |
Tradenames and Trademarks [Member] | Minimum [Member] | ||
Estimated Useful Life | 2 years 6 months | |
Tradenames and Trademarks [Member] | Maximum [Member] | ||
Estimated Useful Life | 15 years | |
Accreditations [Member] | ||
Intangible and other assets, gross | $ 85,395 | 97,706 |
Estimated Useful Life | 5 years | |
Customer Relationships [Member] | ||
Intangible and other assets, gross | $ 3,346,551 | 3,084,551 |
Customer Relationships [Member] | Minimum [Member] | ||
Estimated Useful Life | 8 years | |
Customer Relationships [Member] | Maximum [Member] | ||
Estimated Useful Life | 15 years | |
Beneficial lease arrangement [Member] | ||
Intangible and other assets, gross | 120,200 | |
Estimated Useful Life | 11 years | |
Patents [Member] | ||
Intangible and other assets, gross | $ 970,100 | $ 970,100 |
Estimated Useful Life | 4 years | |
Noncompete Agreements [Member] | ||
Intangible and other assets, gross | $ 94,000 | |
Estimated Useful Life | 5 years |
Intangible and Other Assets (_2
Intangible and Other Assets (Details Narrative) | Sep. 24, 2018USD ($) | Aug. 08, 2018USD ($)$ / sharesshares | Jan. 12, 2018USD ($)ft² | Sep. 30, 2018USD ($) | Aug. 09, 2018USD ($)a | Dec. 31, 2012USD ($)aft² |
Operating Leased Assets [Line Items] | ||||||
Beneficial lease arrangement | $ 991,000 | |||||
Net book value of beneficial lease wriiten-off | $ 100,000 | |||||
Amount paid in cash | $ 450,000 | |||||
Value of number of shares issued | $ 433,131 | |||||
Beef, LLC [Member] | ||||||
Operating Leased Assets [Line Items] | ||||||
Amount paid in cash | $ 900,000 | |||||
Number of shares issued (in shares) | shares | 53,340 | |||||
Value of number of shares issued | $ 91,100 | |||||
Business acquisition, share price (in dollars per share) | $ / shares | $ 1.81 | |||||
North Dakota Office [Member] | ||||||
Operating Leased Assets [Line Items] | ||||||
Area of land owned, lease office space | a | 1.81 | 0.75 | ||||
Number of square foot of leased space | ft² | 2,300 | |||||
Beneficial lease arrangement | $ 120,200 | |||||
Number of square foot of real property | ft² | 2,300 | |||||
Net book value of beneficial lease wriiten-off | $ 56,500 |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Income and sales taxes payable | $ 24,281 | $ 255,099 |
Payroll related accruals | 660,114 | 148,408 |
Professional fees and other expenses | 220,386 | 80,326 |
Deferred rent expense | 140,961 | 71,296 |
Accrued Expenses and Other Current Liabilities | $ 1,045,742 | $ 555,129 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Notes Payable [Abstract] | ||
Vehicle note | $ 44,836 | $ 51,898 |
Less current portion of notes payable and other long-term debt | (9,986) | (9,446) |
Notes payable and other long-term debt | $ 34,850 | $ 42,452 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Revolving Line of Credit [Member] | |||
Debt instrument, face amount | $ 75,050 | ||
Maturity date on debt | Apr. 12, 2020 | ||
Effective interest rate | 6.75% | 5.50% | |
Interest rate, basis spread | 1.50% | ||
Note Payable - Vehicle [Member] | |||
Debt instrument, face amount | $ 54,165 | ||
Interest and principal payments | $ 1,087 | ||
Interest rate | 7.44% | ||
Debt instrument term | 5 years |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 45,218 | $ 41,167 | $ 125,239 | $ 130,637 |
Stock Options [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | 28,445 | 14,687 | 64,820 | 44,100 |
Restricted Stock Awards [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 16,773 | $ 26,480 | $ 60,419 | $ 86,537 |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) | 9 Months Ended |
Sep. 30, 2018shares | |
Number of options awarded to purchase common shares | 105,750 |
Expected life of options from the date of grant | 9 years 9 months 18 days |
Minimum [Member] | |
Risk-free interest rate | 2.60% |
Expected volatility | 149.30% |
Maximum [Member] | |
Risk-free interest rate | 2.80% |
Expected volatility | 154.30% |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details 2) | Sep. 30, 2018USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | $ 250,660 |
Unvested restricted stock awards | 26,589 |
Total Unrecognized Compensation Expense | 277,249 |
2018 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 31,686 |
Unvested restricted stock awards | 5,958 |
Total Unrecognized Compensation Expense | 37,644 |
2019 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 121,749 |
Unvested restricted stock awards | 15,674 |
Total Unrecognized Compensation Expense | 137,423 |
2020 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 69,154 |
Unvested restricted stock awards | 4,251 |
Total Unrecognized Compensation Expense | 73,405 |
2021 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 28,071 |
Unvested restricted stock awards | 706 |
Total Unrecognized Compensation Expense | $ 28,777 |
Stock-Based Compensation (Det_4
Stock-Based Compensation (Details 3) - USD ($) | Jul. 09, 2018 | Sep. 30, 2018 |
Number of Awards | ||
Balance, beginning | 266,585 | |
Granted | 70,750 | 105,750 |
Expired/Forfeited | (5,334) | |
Balance, ending | 367,001 | |
Exercisable, ending | 199,913 | |
Unvested, ending | 167,088 | |
Weighted Avg. Exercise Price per Share | ||
Balance, beginning | $ 1.23 | |
Granted | 2 | |
Expired/Forfeited | 1.87 | |
Balance, ending | 1.44 | |
Exercisable, ending | 1 | |
Unvested, ending | 1.96 | |
Weighted Avg Fair Value per Share | ||
Balance, beginning | 1.22 | |
Granted | 1.96 | |
Expired/Forfeited | 1.86 | |
Balance, ending | 1.43 | |
Exercisable, ending | 1.01 | |
Unvested, ending | $ 1.93 | |
Weighted Avg Remaining Contractual Life (in years) | ||
Balance, beginning | 6 years 22 days | |
Granted | 9 years 8 months 16 days | |
Expired/Forfeited | 6 years 4 months 20 days | |
Balance, ending | 6 years 6 months 25 days | |
Exercisable, ending | 4 years 4 months 24 days | |
Unvested, ending | 9 years 1 month 28 days | |
Aggregate Intrinsic Value. | ||
Balance, beginning | $ 462,508 | |
Balance, ending | 391,117 | |
Exercisable, ending | 299,076 | |
Unvested, ending | $ 92,041 |
Stock-Based Compensation (Det_5
Stock-Based Compensation (Details 4) - $ / shares | Jul. 09, 2018 | Sep. 30, 2018 |
Weighted Average Exercise Price | ||
Granted | $ 1.80 | |
Restricted Stock Awards [Member] | ||
Restricted Stock | ||
Balance, beginning | 99,000 | |
Granted | 5,000 | |
Vested | (74,000) | |
Balance, ending | 30,000 | |
Weighted Average Exercise Price | ||
Balance, beginning | $ 2.56 | |
Granted | 2.55 | |
Vested | 2.63 | |
Balance, ending | $ 2.38 |
Stock-Based Compensation (Det_6
Stock-Based Compensation (Details Narrative) - $ / shares | Jul. 09, 2018 | Mar. 08, 2018 | Aug. 30, 2017 | Sep. 30, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options - Granted | 70,750 | 105,750 | ||
Exercise price - Granted | $ 1.80 | |||
JVF Consulting [Member[ | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options - Granted | 10,000 | |||
Exercise price - Granted | $ 1.99 | |||
Consultant [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options - Granted | 25,000 | |||
Exercise price - Granted | $ 2.55 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Dec. 22, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Income Tax Disclosure [Abstract] | |||||
Income tax expense | $ 169,000 | $ 199,000 | $ 257,000 | $ 150,000 | |
U.S. federal corporate income tax rate | 21.00% | 40.00% | 35.00% |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Sep. 30, 2018USD ($) |
Years ended December 31st: | |
2,018 | $ 125,957 |
2,019 | 476,165 |
2,020 | 465,187 |
2,021 | 479,143 |
2,022 | 493,517 |
Thereafter | 4,891,163 |
Total lease commitments | $ 6,931,132 |
Commitments and Contingencies_3
Commitments and Contingencies (Details 1) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Redeemable noncontrolling interest, beginning | $ 1,574,765 |
Net loss attributable to non-controlling interest | (53,261) |
Redeemable noncontrolling interest, ending | $ 1,521,504 |
Commitments and Contingencies_4
Commitments and Contingencies (Details Narrative) | Jan. 12, 2018USD ($) | Nov. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Aug. 31, 2017USD ($)ft² | Sep. 30, 2018USD ($)ft²Number | Dec. 31, 2017 | Sep. 30, 2016 | Dec. 31, 2012ft² |
SureHarvest Services LLC [Member] | ||||||||
Rental payments | $ 2,200 | |||||||
SureHarvest Services LLC [Member] | Modesto [Member] | ||||||||
Monthly rental rate | $ 600 | |||||||
Number of square feet of leased space | ft² | 8,000 | |||||||
Lease expiration date | Nov. 30, 2018 | |||||||
SureHarvest Services LLC [Member] | Soquel [Member] | ||||||||
Monthly rental rate | $ 2,700 | |||||||
Castle Rock New Lease [Member] | ||||||||
Monthly rental rate | $ 18,000 | |||||||
Amortization period of leased assets | 15 years | |||||||
Lease incentives | $ 163,000 | |||||||
Leasehold improvements | 425,000 | |||||||
Castle Rock New Lease [Member] | CEO and President[Member] | ||||||||
Ownership by related party | 27.00% | |||||||
First Amendment Castle Rock New Lease [Member] | ||||||||
Monthly rental rate | $ 35,100 | |||||||
Number of square feet of leased space | ft² | 7,700 | |||||||
Lease incentives | $ 230,200 | |||||||
Leasehold improvements | $ 370,500 | |||||||
North Dakota Office [Member] | ||||||||
Term of the operating lease | 5 years | |||||||
Renewal options | Number | 1 | |||||||
Monthly rental rate | $ 150 | |||||||
Number of square feet of leased space | ft² | 2,300 | |||||||
Lease expiration date | Mar. 1, 2018 | |||||||
Purchase price funded by cash | $ 135,600 | |||||||
Urbandale, Lowa Office [Member] | ||||||||
Term of the operating lease | 2 years | |||||||
Monthly rental rate | $ 2,900 | |||||||
Revolving Line of Credit [Member] | ||||||||
Debt instrument, face amount | $ 75,050 | |||||||
Maturity date on debt | Apr. 12, 2020 | |||||||
Effective interest rate | 6.75% | 5.50% | ||||||
Interest rate, basis spread | 1.50% |
Segments (Details)
Segments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues: | ||||
Total revenues | $ 5,125,378 | $ 4,734,435 | $ 13,184,488 | $ 11,310,465 |
Costs of revenues: | ||||
Total costs of revenues | 2,888,856 | 2,693,099 | 7,204,917 | 6,216,304 |
Gross profit | 2,236,522 | 2,041,336 | 5,979,571 | 5,094,161 |
Selling, general and administrative expenses | 1,819,019 | 1,591,597 | 5,293,961 | 4,773,446 |
Segment operating income | 417,503 | 449,739 | 685,610 | 320,715 |
Verification and certification service revenue [Member] | ||||
Revenues: | ||||
Total revenues | 3,906,996 | 3,672,587 | 10,210,947 | 9,152,520 |
Costs of revenues: | ||||
Total costs of revenues | 2,098,462 | 2,096,907 | 5,399,626 | 4,928,139 |
Product sales [Member] | ||||
Revenues: | ||||
Total revenues | 783,303 | 687,235 | 1,633,509 | 1,226,141 |
Costs of revenues: | ||||
Total costs of revenues | 489,149 | 410,309 | 1,035,094 | 743,308 |
Software license, maintenance and support services revenue [Member] | ||||
Revenues: | ||||
Total revenues | 208,541 | 243,186 | 759,301 | 532,684 |
Costs of revenues: | ||||
Total costs of revenues | 183,942 | 141,902 | 489,887 | 362,139 |
Software license, maintenance and support services revenue [Member] | ||||
Revenues: | ||||
Total revenues | 226,538 | 131,427 | 580,731 | 399,120 |
Costs of revenues: | ||||
Total costs of revenues | 117,303 | 43,981 | 280,310 | 182,718 |
Verification and Certification Segment [Member] | ||||
Revenues: | ||||
Total revenues | 4,690,299 | 4,359,822 | 11,844,456 | 10,378,661 |
Costs of revenues: | ||||
Total costs of revenues | 2,587,611 | 2,507,216 | 6,434,720 | 5,671,447 |
Gross profit | 2,102,688 | 1,852,606 | 5,409,736 | 4,707,214 |
Selling, general and administrative expenses | 1,545,512 | 1,308,442 | 4,456,352 | 3,670,771 |
Segment operating income | 557,176 | 544,164 | 953,384 | 1,036,443 |
Verification and Certification Segment [Member] | Verification and certification service revenue [Member] | ||||
Revenues: | ||||
Total revenues | 3,906,996 | 3,672,587 | 10,210,947 | 9,152,520 |
Costs of revenues: | ||||
Total costs of revenues | 2,098,462 | 2,096,907 | 5,399,626 | 4,928,139 |
Verification and Certification Segment [Member] | Product sales [Member] | ||||
Revenues: | ||||
Total revenues | 783,303 | 687,235 | 1,633,509 | 1,226,141 |
Costs of revenues: | ||||
Total costs of revenues | 489,149 | 410,309 | 1,035,094 | 743,308 |
Software Sales and Related Consulting Segment [Member] | ||||
Revenues: | ||||
Total revenues | 435,079 | 374,613 | 1,340,032 | 931,804 |
Costs of revenues: | ||||
Total costs of revenues | 301,245 | 185,883 | 770,197 | 544,857 |
Gross profit | 133,834 | 188,730 | 569,835 | 386,947 |
Selling, general and administrative expenses | 273,507 | 283,155 | 837,609 | 1,102,675 |
Segment operating income | (139,673) | (94,425) | (267,774) | (715,728) |
Software Sales and Related Consulting Segment [Member] | Software license, maintenance and support services revenue [Member] | ||||
Revenues: | ||||
Total revenues | 208,541 | 243,186 | 759,301 | 532,684 |
Costs of revenues: | ||||
Total costs of revenues | 183,942 | 141,902 | 489,887 | 362,139 |
Software Sales and Related Consulting Segment [Member] | Software license, maintenance and support services revenue [Member] | ||||
Revenues: | ||||
Total revenues | 226,538 | 131,427 | 580,731 | 399,120 |
Costs of revenues: | ||||
Total costs of revenues | $ 117,303 | $ 43,981 | $ 280,310 | $ 182,718 |
Supplemental Cash Flow Inform_3
Supplemental Cash Flow Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash paid during the year: | ||
Interest expense | $ 3,755 | $ 603 |
Income taxes | 418,965 | 184,440 |
Non-cash investing and financing activities: | ||
Common stock issued for acquisition-related consulting fees | 25,000 | |
Vehicle acquired under note payable | 54,165 | |
Sow Organic [Member] | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisition | 433,131 | |
A Bee Organic [Member] | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisition | 98,221 | |
Progressive Beef [Member[ | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisition | 91,115 | |
JVF Consulting [Member[ | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisition | 315,291 | |
Capital Lease [Member] | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisition | 19,809 | $ 18,033 |
Lease Incentive Obligation [Member] | ||
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisition | $ 230,220 |
Revenue from Contracts with C_3
Revenue from Contracts with Customers (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues: | ||||
Verification and certification service revenue | $ 3,906,996 | $ 3,672,587 | $ 10,210,947 | $ 9,152,520 |
Costs and expenses: | ||||
Cost of verification and certification services | $ 2,098,462 | $ 2,096,907 | 5,399,626 | $ 4,928,139 |
Under ASC 605 [Member] | ||||
Revenues: | ||||
Verification and certification service revenue | 114,900 | |||
Costs and expenses: | ||||
Cost of verification and certification services | 114,900 | |||
Increase / (Decrease) [Member] | ||||
Revenues: | ||||
Verification and certification service revenue | (114,900) | |||
Costs and expenses: | ||||
Cost of verification and certification services | $ (114,900) |
Revenue from Contracts with C_4
Revenue from Contracts with Customers (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||
Total revenues | $ 5,125,378 | $ 13,184,488 |
Verification and Certification Service [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 3,906,996 | 10,210,947 |
Product Sales [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 783,303 | 1,633,509 |
Software License, Maintenance and Support Services Revenue [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 208,541 | 759,301 |
Software-related Consulting Service Revenue [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 226,538 | 580,731 |
Verification and Certification Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 4,690,299 | 11,844,456 |
Verification and Certification Segment [Member] | Verification and Certification Service [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 3,906,996 | 10,210,947 |
Verification and Certification Segment [Member] | Product Sales [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 783,303 | 1,633,509 |
Software Sales and Related Consulting Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 435,079 | 1,340,032 |
Software Sales and Related Consulting Segment [Member] | Software License, Maintenance and Support Services Revenue [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 208,541 | 759,301 |
Software Sales and Related Consulting Segment [Member] | Software-related Consulting Service Revenue [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | $ 226,538 | $ 580,731 |
Revenue from Contracts with C_5
Revenue from Contracts with Customers (Details Narrative) - USD ($) | Sep. 30, 2018 | Jan. 02, 2018 |
Accounts receivable from contract with customers | $ 2,563,100 | $ 1,898,700 |
Deposits and Deferred Revenue [Member] | ||
Contract of customer liability | $ 976,900 | $ 851,200 |