Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 20, 2020 | Jun. 28, 2019 | |
Cover [Abstract] | |||
Entity Registrant Name | Where Food Comes From, Inc. | ||
Entity Central Index Key | 0001360565 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 333-133624 | ||
Entity Incorporation, State or Country Code | CO | ||
Entity Well-known Season Issuer | No | ||
Entity Voluntary Filer | No | ||
Entity Reporting Status Current | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Public Float | $ 21,689,707 | ||
Closing Stock Price | $ 1.77 | ||
Entity Common Stock, Shares Outstanding | 25,049,462 | ||
Entity Shell Company | false | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 2,637,665 | $ 1,482,391 |
Accounts receivable, net of allowance | 2,515,244 | 2,205,162 |
Short-term investments in certificates of deposit | 258,097 | 245,597 |
Prepaid expenses and other current assets | 450,346 | 439,424 |
Total current assets | 5,861,352 | 4,372,574 |
Property and equipment, net | 1,545,294 | 1,675,472 |
Right-of-use assets | 3,268,343 | |
Long-term investments in certificates of deposit | 252,999 | |
Investment in Progressive Beef | 991,115 | 991,115 |
Intangible and other assets, net | 3,247,695 | 3,852,121 |
Goodwill, net | 2,945,734 | 3,143,734 |
Deferred tax assets, net | 377,928 | 175,923 |
Total assets | 18,237,461 | 14,463,938 |
Current liabilities: | ||
Accounts payable | 1,022,835 | 533,925 |
Accrued expenses and other current liabilities | 673,768 | 492,601 |
Deferred revenue | 797,033 | 654,872 |
Current portion of notes payable | 10,173 | |
Current portion of finance lease obligations | 8,317 | 11,309 |
Current portion of operating lease obligations | 239,519 | |
Total current liabilities | 2,741,472 | 1,702,880 |
Notes payable, net of current portion | 32,220 | |
Finance lease obligations, net of current portion | 21,405 | 32,747 |
Operating lease obligation, net of current portion | 3,525,462 | |
Deferred rent liability | 119,187 | |
Lease incentive obligation | 362,088 | |
Total liabilities | 6,288,339 | 2,249,122 |
Commitments and contingencies | ||
Contingently redeemable non-controlling interest | 1,449,007 | |
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; 25,802,066 (2019) and 25,473,115 (2018) shares issued, and 24,977,344 (2019) and 24,968,256 (2018) shares outstanding | 25,802 | 25,473 |
Additional paid-in-capital | 11,424,512 | 11,031,264 |
Treasury stock of 824,722 (2019) and 504,859 (2018) shares | (1,664,490) | (1,109,061) |
Retained earnings | 2,163,298 | 818,133 |
Total equity | 11,949,122 | 10,765,809 |
Total liabilities and stockholders' equity | $ 18,237,461 | $ 14,463,938 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 95,000,000 | 95,000,000 |
Common stock, issued | 25,802,066 | 25,473,115 |
Common stock, outstanding | 24,977,344 | 24,968,256 |
Treasury stock | 824,722 | 504,859 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues: | ||
Total revenues | $ 20,774,416 | $ 17,803,559 |
Costs of revenues: | ||
Total costs of revenues | 11,695,001 | 10,059,808 |
Gross profit | 9,079,415 | 7,743,751 |
Selling, general and administrative expenses | 7,527,044 | 6,869,198 |
Income from operations | 1,552,371 | 874,553 |
Other expense (income): | ||
Dividend income from Progressive Beef | (120,000) | (100,000) |
Gain on sale of assets | (9,326) | |
Impairment of goodwill | 198,000 | |
Other income, net | (9,330) | (14,270) |
Interest expense | 10,057 | 4,837 |
Income before income taxes | 1,482,970 | 983,986 |
Income tax expense | 460,000 | 309,008 |
Net income | 1,022,970 | 674,978 |
Net loss attributable to non-controlling interest | 322,195 | 125,758 |
Net income attributable to Where Food Comes From, Inc. | $ 1,345,165 | $ 800,736 |
Per share - net income attributable to Where Food Comes From, Inc.: | ||
Basic (in dollars per share) | $ 0.05 | $ 0.03 |
Diluted (in dollars per share) | $ 0.05 | $ 0.03 |
Weighted average number of common shares outstanding: | ||
Basic (in shares) | 24,850,409 | 24,825,933 |
Diluted (in shares) | 25,027,247 | 24,989,457 |
Verification and Certification Service Revenue [Member] | ||
Revenues: | ||
Total revenues | $ 15,564,411 | $ 13,743,311 |
Costs of revenues: | ||
Total costs of revenues | 8,444,309 | 7,564,946 |
Product Sales [Member] | ||
Revenues: | ||
Total revenues | 3,300,799 | 2,266,771 |
Costs of revenues: | ||
Total costs of revenues | 2,148,564 | 1,438,648 |
Software License, Maintenance and Support Services Revenue [Member] | ||
Revenues: | ||
Total revenues | 1,066,543 | 993,161 |
Costs of revenues: | ||
Total costs of revenues | 615,248 | 644,746 |
Software-Related Consulting Service Revenue [Member] | ||
Revenues: | ||
Total revenues | 842,663 | 800,316 |
Costs of revenues: | ||
Total costs of revenues | $ 486,880 | $ 411,468 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Operating activities: | ||
Net income | $ 1,022,970 | $ 674,978 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 1,096,460 | 942,418 |
Impairment of goodwill | 198,000 | |
Lease incentive obligation | (15,321) | |
Deferred rent liability | 119,187 | |
Write-off beneficial lease arrangement | 56,457 | |
Gain on sale of assets | (9,326) | |
Stock-based compensation expense | 162,405 | 161,128 |
Deferred tax benefit | (97,645) | (96,301) |
Bad debt expense | 27,295 | 30,000 |
Changes in operating assets and liabilities, net of effect from acquisitions: | ||
Accounts receivable | (337,377) | (336,412) |
Short-term investments | (12,500) | (5,390) |
Prepaid expenses and other assets | (10,922) | (194,351) |
Accounts payable | 488,910 | 76,618 |
Accrued expenses and other current liabilities | 181,167 | (108,814) |
Deferred revenue | 142,161 | (150,027) |
Right of use assets and liabilities, net | 23,333 | |
Net cash provided by operating activities | 2,874,931 | 1,154,170 |
Investing activities: | ||
Acquisition of Sow Organic | (450,000) | |
Acquisition of JVF Consulting | (500,000) | |
Acquisition of non-controlling interest in SureHarvest Services, LLC, net of tax effect | (1,000,000) | |
Investment in Progressive Beef | (900,000) | |
Proceeds from sale of assets | 1,000 | |
Purchases of property, equipment and software development costs | (369,200) | (366,691) |
Proceeds from maturity of short-term investments | 252,999 | 250,000 |
Redemption (purchases) of other long-term assets | (8,131) | |
Net cash used in investing activities | (1,115,201) | (1,974,822) |
Financing activities: | ||
Repayments of notes payable | (42,393) | (9,505) |
Repayments of finance lease obligations | (6,634) | (8,699) |
Stock repurchase under Stock Buyback Plan | (555,429) | (384,531) |
Net cash used in financing activities | (604,456) | (402,735) |
Net change in cash | 1,155,274 | (1,223,387) |
Cash at beginning of period | 1,482,391 | 2,705,778 |
Cash at end of period | $ 2,637,665 | $ 1,482,391 |
Consolidated Statement of Equit
Consolidated Statement of Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Treasury Stock [Member] | Retained Earnings [Member] | Total |
Balance at beginning at Dec. 31, 2017 | $ 24,972 | $ 10,353,037 | $ (724,530) | $ 17,397 | $ 9,670,876 |
Balance at beginning (in shares) at Dec. 31, 2017 | 24,652,895 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Effect of acquisition fair value adjustment | (321,937) | (321,937) | |||
Stock-based compensation expense | 161,128 | 161,128 | |||
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 (in 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 (in 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 (in shares) | 158,437 | ||||
Repurchase of common shares under Stock Buyback Plan | (384,531) | $ (384,531) | |||
Repurchase of common shares under Stock Buyback Plan (in shares) | (185,070) | (185,070) | |||
Vesting of restricted shares issued to employees | $ 74 | (74) | |||
Vesting of restricted shares issued to employees (in shares) | 74,000 | ||||
Net income attributable to Where Food Comes From, Inc. | 800,736 | $ 800,736 | |||
Balance at ending at Dec. 31, 2018 | $ 25,473 | 11,031,264 | (1,109,061) | 818,133 | $ 10,765,809 |
Balance at ending (in shares) at Dec. 31, 2018 | 24,968,256 | 24,968,256 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation expense | 162,405 | $ 162,405 | |||
Acquisition of non-controlling interest in SureHarvest Services, LLC, net of tax effect | $ 304 | 230,868 | 231,172 | ||
Acquisition of non-controlling interest in SureHarvest Services, LLC, net of tax effect (in shares) | 303,951 | ||||
Repurchase of common shares under Stock Buyback Plan | (555,429) | $ (555,429) | |||
Repurchase of common shares under Stock Buyback Plan (in shares) | (319,863) | (319,863) | |||
Vesting of restricted shares issued to employees | $ 25 | (25) | |||
Vesting of restricted shares issued to employees (in shares) | 25,000 | ||||
Net income attributable to Where Food Comes From, Inc. | 1,345,165 | $ 1,345,165 | |||
Balance at ending at Dec. 31, 2019 | $ 25,802 | $ 11,424,512 | $ (1,664,490) | $ 2,163,298 | $ 11,949,122 |
Balance at ending (in shares) at Dec. 31, 2019 | 24,977,344 | 24,977,344 |
The Company and Basis of Presen
The Company and Basis of Presentation | 12 Months Ended |
Dec. 31, 2019 | |
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 consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from the estimates. Our consolidated financial statements include the accounts of all majority-owned or controlled subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired are included in the consolidated financial statements from the date of the acquisition. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 - Summary of Significant Accounting Policies Cash and Cash Equivalents We place our cash with high quality financial institutions. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit; however, we have not experienced any losses related to balances that exceed such FDIC insurance limits (currently $250,000), and we believe our credit risk is minimal. At times, we may also invest in short-term investments with original maturities of three months or less, which we consider to be cash and cash equivalents, since they are readily convertible to cash. Short-Term Investments in certificates of deposit Certificates of deposit with original maturities greater than three months and remaining maturities less than one year are classified as “short-term investments.” Long-Term Investments in certificates of deposit Certificates of deposit with original maturities greater than three months and remaining maturities greater than one year are classified as “long-term investments.” As of December 31, 2019, the previous long-term investments fully mature in May 2020 and have been reclassed to short-term investments in certificates of deposit. 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 the 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 customers 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 the 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 the 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 related to consulting services 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. 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. Year ended December 31, 2019 Year ended December 31, 2018 Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Revenues: Verification and certification service revenue $ 15,564,411 $ — $ — $ 15,564,411 $ 13,743,311 $ — $ — $ 13,743,311 Product sales 3,300,799 — — 3,300,799 2,266,771 — — 2,266,771 Software license, maintenance and support services revenue — 1,273,820 (207,277 ) 1,066,543 — 993,161 — 993,161 Software-related consulting service revenue — 947,524 (104,861 ) 842,663 — 800,316 — 800,316 Total revenues $ 18,865,210 $ 2,221,344 $ (312,138 ) $ 20,774,416 $ 16,010,082 $ 1,793,477 $ — $ 17,803,559 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 December 31, 2019, and January 1, 2019, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $2.5 million and $2.2 million, respectively. As of December 31, 2019, and January 1, 2019, deferred revenue from contracts with customers were approximately $0.8 million and $0.7 million, respectively. The balance of the contract liabilities at December 31, 2018 was recognized as revenue in 2019 and the balance at December 31, 2019 is expected to be recognized as revenue during 2020. The following table reflects the changes in our contract liabilities during the year ended December 31, 2019: Deferred revenue: Unearned revenue January 1, 2019 $ 654,873 Unearned billings 2,683,647 Revenue recognized (2,541,487 ) Unearned revenue December 31, 2019 $ 797,033 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 discussed in Note 3, on August 30, 2018, we acquired 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 December 31, 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 years-ended December 31, 2019 and 2018. In addition, amortization of capitalized set-up costs for the year ended December 31, 2018 was not material, and no impairment loss was incurred related to capitalized set-up costs for the year ended December 31, 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. Cost of Revenues Salaries and related fringe benefits directly associated with our verification and certification service revenues are allocated to costs of verification and certification services. Costs of products primarily represents the cost of livestock ear tags generally used in connection with our verification programs. Livestock identification ear tags sold in connection with our verification offerings are purchased primarily from one supplier. However, there are numerous other companies which manufacture and market such ear tags. Costs of product support, including web-hosting fees, salaries and related fringe benefits directly associated with our software lice |
Business Acquisitions
Business Acquisitions | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Business Acquisitions | Note 3 – Business Acquisitions Sow Organic Acquisition On May 16, 2018, we acquired substantially all of the assets of Sow Organic for $450,000 in cash and 217,654 shares of common stock of WFCF valued at approximately $433,100. We believe the transaction further diversifies our offerings by adding complementary solutions and services available to new and existing customers. 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. We believe the impacts on proforma revenue and earnings are immaterial. 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 December 31, 2018. Sow Organic, LLC: May 16, 2018 (as reported) Adjustments May 16, 2018 (as adjusted) Software acquired $ 445,000 (289,000 ) $ 156,000 Identifiable 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 final 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. JVF Consulting Acquisition On August 30, 2018, we acquired substantially all of the assets of 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. 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 controls the intellectual property associated with its current Software as a Service (SaaS) offerings. Additionally, WFCF employed 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. 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 August 30, 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 December 31, 2018. JVF Consulting, LLC: August 30, 2018 Adjustments August 30, 2018 (as adjusted) Software acquired $ 250,000 (43,000 ) $ 207,000 Identifiable intangible assets: Tradenames and trademarks 5,290 81,710 87,000 Non-compete agreements 10,000 27,000 37,000 Customer relationships 100,000 4,000 104,000 Goodwill 450,000 (69,710 ) 380,290 Total consideration $ 815,290 $ 815,290 Excess attributable to goodwill reflects the excess over the identifiable intangible assets acquired based on the final 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. SureHarvest Consulting, LLC On December 17, 2019 the Company exercised its option to acquire the remaining 40% membership interest in SureHarvest for $1,000,000 in cash and 303,951 shares of common stock of WFCF valued at approximately $547,000 based on the closing price of our stock on December 17, 2019 of $1.80 per share. The Additional Paid-In Capital amount reflected on the Consolidated Statement of Equity includes adjustments for deferred income tax of approximately $102,000 and reversal of the previously recorded allocation of net losses attributable to the non-controlling interest of approximately $420,000. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 4 - Property and Equipment The major categories of property and equipment are as follows as of December 31st: 2019 2018 Automobiles $ 115,127 $ 130,841 Furniture and office equipment 539,122 419,014 Software and tools 1,449,216 1,299,454 Website development and other enhancements 183,385 183,385 Building and leasehold improvements 992,386 984,058 Land 2,436 2,436 3,281,672 3,019,188 Less accumulated depreciation 1,736,378 1,343,716 Property and equipment, net $ 1,545,294 $ 1,675,472 Total depreciation expense for the years ended December 31, 2019 and 2018 was approximately $472,600 and $372,300, respectively. Depreciation expense for assets recorded under finance leases was approximately $22,000 and $8,967 for the years ended December 31, 2019 and 2018, respectively. |
Investment in Progressive Beef,
Investment in Progressive Beef, LLC | 12 Months Ended |
Dec. 31, 2019 | |
Investments, All Other Investments [Abstract] | |
Investment in Progressive Beef, LLC | Note 5 - 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. As of December 31, 2019 and 2018, the Company received dividend income of approximately $120,000 and $100,000, respectively, from Progressive Beef representing a distribution of their earnings. The income is reflected within the “other (expense) income” section of the Company’s Consolidated Statement of Income for the years ended December 31, 2019 and 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. The Company completed a qualitative assessment and determined that there were no impairment indicators as of December 31, 2019 and 2018. |
Intangible and Other Assets
Intangible and Other Assets | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible and Other Assets | Note 6 – Intangible and Other Assets The following table summarizes our intangible assets as of: December 31, December 31, Estimated 2019 2018 Useful Life Intangible assets subject to amortization: Tradenames and trademarks $ 417,307 $ 417,307 2.5 - 8.0 years Accreditations 85,395 85,395 5.0 years Customer relationships 3,350,551 3,350,551 3.0 - 15.0 years Patents 970,100 970,100 4.0 years Non-compete agreements 121,000 121,000 5.0 years 4,944,353 4,944,353 Less accumulated amortization 2,181,984 1,577,558 2,762,369 3,366,795 Tradenames/trademarks (not subject to amortization) 465,000 465,000 3,227,369 3,831,795 Other assets 20,326 20,326 Intangible and other assets: $ 3,247,695 $ 3,852,121 We reviewed our long-lived assets for indicators of impairment in 2019 and 2018 and concluded in each year that no impairments exist. Amortization expense for the years ended December 31, 2019 and 2018 was approximately $604,400 and $570,100, respectively. As of December 31, 2019, future scheduled amortization of intangible assets is as follows: Fiscal year ending December 31: 2020 579,925 2021 330,666 2022 318,106 2023 277,636 2024 266,403 Thereafter 989,634 $ 2,762,370 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. |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Note 7 – Goodwill Changes in the net carrying value of goodwill by segment are as follows: Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated January 1, 2018 $ 1,279,762 $ 1,372,488 $ 2,652,250 Additions — 813,421 813,421 Adjustments (146,640 ) (175,297 ) (321,937 ) December 31, 2018 $ 1,133,122 $ 2,010,612 $ 3,143,734 Additions — — — Impairment — (198,000 ) (198,000 ) December 31, 2019 $ 1,133,122 $ 1,812,612 $ 2,945,734 Annual Impairment Test of Goodwill We performed a qualitative assessment on our ICS and Validus reporting units (within our reportable operating segment: Verification and Certification Segment) for our 2019 annual test and concluded that it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value and, therefore, a two-step impairment test was not necessary. The qualitative assessment compares current performance, expectations and other indicators against what was expected as part of the most recent Step 1 valuation. Consequently, the key estimates and assumptions related to the most recent Step 1 valuation pertaining to this reporting unit had not changed since our previous annual report. For our 2019 annual test, we performed a quantitative assessment on our SureHarvest reporting unit. SureHarvest, which includes Sow Organic and JVF Consulting, is the sole operating segment within the Software Sales and Related Consulting segment. We estimated the SureHarvest reporting unit’s fair value using a 14-year projection of discounted cash flows which incorporates planned growth rates, market-based discount rates and estimates of residual value. Additionally, we used a market-based, weighted-average cost of capital of 20.1% to discount the projected cash flows of those operations. Estimating the fair value of an individual reporting unit requires us to make assumptions and estimates regarding our future plans, industry and economic conditions and our actual results and conditions may differ over time. If the carrying value of a reporting unit’s net assets exceeds its fair value, the second step is applied to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is considered impaired and reduced to its implied fair value. In connection with our testing, we noted the SureHarvest reporting unit was more sensitive to near-term changes in discounted cash flow assumptions. As of December 31, 2019, the fair value did not exceed the carrying value of net assets by approximately 4.0%. An impairment of goodwill of approximately $198,000 was recognized as of December 31, 2019. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Current Liabilities | Note 8 – Accrued Expenses and Other Current Liabilities The following table summarizes our accrued expenses and other current liabilities as of: December 31, 2019 December 31, 2018 Income and sales taxes payable $ 170,850 $ 19,978 Payroll related accruals 201,015 147,798 Customer deposits 62,305 72,982 Professional fees and other expenses 239,598 251,843 $ 673,768 $ 492,601 |
Notes Payable and Lease Obligat
Notes Payable and Lease Obligations | 12 Months Ended |
Dec. 31, 2019 | |
Notes Payable and Lease Obligations [Abstract] | |
Notes Payable and Lease Obligations | Note 9 - Notes Payable and Lease Obligations Equipment Note December 31, December 31, Vehicle note $ — $ 42,393 Less current portion of notes payable and other long-term debt — (10,173 ) Notes payable and other long-term debt $ — $ 32,220 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. The Company paid the balance of the note in full during 2019. Unison Revolving Line of Credit The Company has a revolving line of credit (“LOC”) agreement which matures on April 12, 2020. The LOC provides for $75,080 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 upon maturity. As of December 31, 2019 and 2018, the effective interest rate was 6.25% and 7.0%, respectively. The LOC is collateralized by all the business assets of ICS. As of December 31, 2019 and 2018, there were no amounts outstanding under this LOC. Lease Obligations We have operating and finance leases for corporate offices, other regional offices, and certain equipment. Our leases have remaining lease terms of 1 year to 15 years, some of which include multiple options to extend the leases for up to 5 years each. The components of lease expense were as follows: Year ended Operating lease cost $ 469,231 Finance lease cost Amortization of assets 8,406 Interest on finance lease obligations 7,298 Variable lease cost — Total net lease cost $ 484,935 Included in the table above, is approximately $339,500 for the year ended December 31, 2019, respectively, of operating lease cost for our corporate headquarters. This space is being leased from The Move, LLC. Our CEO and President, each a related party to WFCF, have a 24.3% jointly-held ownership interest in The Move, LLC. Rent and lease expense for the years ended December 31, 2019 and 2018 was $614,300 and $548,300, respectively. Supplemental balance sheet information related to leases was as follows: December 31, 2019 Operating leases: Related Party Other Total Right of use asset $ 2,932,803 $ 314,433 $ 3,247,236 Current operating lease liabilities 158,306 81,213 239,519 Noncurrent operating lease liabilities 3,259,509 265,954 3,525,462 Total operating lease liabilities $ 3,417,815 $ 347,167 $ 3,764,981 Finance leases: December 31, 2019 Right of use asset, at cost $ 43,041 Accumulated amortization (21,934 ) Right of use asset, net $ 21,107 Current obligations of finance leases $ 8,317 Finance leases, net of current obligations 21,405 Total finance lease liabilities $ 29,722 Weighted average remaining lease term (in years): Operating leases 11.0 Finance leases 3.0 Weighted average discount rate: Operating leases 5.8 % Finance leases 20.8 % Supplemental cash flow and other information related to leases was as follows: Year ended Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 430,359 Operating cash flows from finance leases $ 7,298 Financing cash flows from finance leases $ 6,634 Right of use assets obtained in exchange for lease liabilities: Operating leases $ 3,513,347 Maturities of lease liabilities were as follows: Years Ending December 31st, Operating Leases Finance Leases 2020 $ 448,992 $ 13,597 2021 461,657 12,355 2022 465,759 10,051 2023 461,310 4,514 2024 407,133 — Thereafter 2,901,022 — Total lease payments 5,145,873 40,517 Less amount representing interest (1,380,892 ) (10,795 ) Total lease obligations 3,764,981 29,722 Less current portion (239,519 ) (8,317 ) Long-term lease obligations $ 3,525,462 $ 21,405 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 10 - Income Taxes The provision for income taxes consists of the following: December 31, 2019 2018 Current income tax expense: Federal $ 438,528 $ 334,526 State 81,681 70,783 Total current income tax expense 520,209 405,309 Deferred income tax benefit: Federal (51,419 ) (82,241 ) State (8,790 ) (14,060 ) Total deferred income tax benefit (60,209 ) (96,301 ) Total income tax expense $ 460,000 $ 309,008 The reconciliation of income taxes calculated at the statutory rates to our effective tax rate is as follows: December 31, 2019 2018 Expected tax expense $ 320,808 $ 196,428 State tax provision, net 54,843 41,227 Permanent differences 11,030 6,765 Minority interest 75,785 30,924 Other, net (2,466 ) 33,664 Total income tax expense $ 460,000 $ 309,008 The income tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows: December 31, 2019 2018 Deferred tax assets (liabilities): Accruals, stock-based compensation and other $ 181,062 $ 162,430 Property and equipment (14,654 ) (67,676 ) Intangibles assets 211,520 81,169 Net deferred tax assets 377,928 175,923 |
Stock Buyback Plan
Stock Buyback Plan | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Stock Buyback Plan | Note 11 – Stock Buyback Plan On January 7, 2008, we announced our intention to buy back up to one million shares of our common stock from the open market at the quoted market price on the date of repurchase. On September 30, 2019, our Board of Directors approved a new plan to buyback up to ten million additional shares of our common stock from the open market (“Stock Buyback Plan”). Activity under the Stock Buyback Plan by year is as follows: Number of Shares Cost of Shares Average Cost per Share Balance, January 1, 2018 319,789 $ 724,530 $ 2.27 Shares purchased during 2018 185,070 384,531 2.08 Balance, December 31, 2018 504,859 1,109,061 2.20 Shares purchased during 2019 319,863 555,429 1.74 Balance, December 31, 2019 824,722 $ 1,664,490 $ 2.02 The repurchased shares are recorded as part of treasury stock and are accounted for under the cost method. Our Stock Buyback Plan has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. In the future, we may consider additional share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, and planned investment and financing needs. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Note 12 – 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: Year ended December 31, 2019 2018 Stock options $ 146,731 $ 94,751 Restricted stock awards 15,674 66,377 Total $ 162,405 $ 161,128 As of December 31, 2019, the estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows: Years ended December 31st: Unvested stock options Unvested restricted stock awards Total unrecognized compensation expense 2020 $ 113,378 $ 4,251 $ 117,629 2021 70,896 706 71,602 2022 3,722 — 3,722 2023 — — — $ 187,996 $ 4,957 $ 192,953 The Company estimated the fair value of stock options using the Black-Scholes-Merton option-pricing model with the following assumptions: Year ended December 31, 2019 2018 Number of options awarded to purchase common shares 10,000 183,750 Risk-free interest rate 1.50% 2.6% - 3.0% Expected volatility 100.3% 115.9 - 154.3% Assumed dividend yield N/A N/A Expected life of options from the date of grant 9.8 years 9.8 years Equity Incentive Plans Our 2006 Equity Incentive Plan (the “2006 Plan”) and 2016 Equity Incentive Plan (the “2016 Plan,” and together with the 2006 Plan, the “Plans”) provide for the issuance of stock-based awards to employees, officers, directors and consultants. The Plans permit the granting of stock awards and stock options. The vesting of stock-based awards is generally subject to the passage of time and continued employment through the vesting period. Our 2006 Plan provided for the issuance of a maximum of 3,000,000 shares of our common stock. The 2006 Plan terminated in September 2016. As of December 31, 2019, the 2006 Plan had 168,751 awards outstanding. Our 2016 Plan was ratified by our shareholders in May 2016 and provides for the issuance of a maximum of 5,000,000 shares of our common stock, of which 4,712,375 shares were still available for issuance as of December 31, 2019. Stock Option Activity The Company generally grants stock options to directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the stock option grants are set forth in the award agreements. A stock option grant represents an option to purchase a defined number of shares of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over one to three years. Stock option activity during 2019 and 2017 is summarized as follows: Number of awards Weighted avg. exercise price per share Weighted avg. grant date fair value per share Weighted avg. remaining contractual life (in years) Aggregate intrinsic value Outstanding, January 1, 2018 266,585 $ 1.23 $ 1.22 6.06 $ 462,508 Granted 183,750 $ 1.91 $ 1.85 9.68 Exercised — $ — $ — — Expired/Forfeited (15,884 ) $ 1.85 $ 1.83 7.86 Outstanding, December 31, 2018 434,451 $ 1.49 $ 1.47 6.91 $ 230,039 Granted 10,000 $ 1.71 $ 1.53 9.80 Exercised — $ — $ — — Expired/Forfeited (7,325 ) $ 1.86 $ 1.83 7.55 Outstanding, December 31, 2019 437,126 $ 1.46 $ 1.49 5.97 $ 150,417 Exercisable, December 31, 2019 $ 310,728 Unvested, December 31, 2019 $ 126,398 The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of our common stock on December 31, 2019 and the exercise price for in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on December 31, 2019. During the year ended December 31, 2019, a total of 7,325 options were forfeited, 3,365 of which were unvested. The options were forfeited upon the employees’ termination from the Company. During the year ended December 31, 2018, a total of 15,884 options were forfeited, 8,318 of which were unvested. Restricted Stock Activity The Company grants shares of restricted stock to directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the awards are set forth in the award agreements. Each share of restricted stock represents one share of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over one to three years. Shares of restricted stock are valued at the closing price of the Company’s common stock on the grant date and are recognized as selling, general and administrative expense over the vesting period of the award. The following table summarizes activity for restricted stock awards for the fiscal years presented: Number of options Weighted avg. grant date fair value Non-vested restricted shares, January 1, 2018 99,000 $ 2.56 Granted 5,000 $ 2.55 Vested (74,000 ) $ 2.63 Forfeited — $ — Non-vested restricted shares, December 31, 2018 30,000 $ 2.38 Granted — $ — Vested (25,000 ) $ 2.35 Forfeited — $ — Non-vested restricted shares, December 31, 2019 5,000 $ 2.55 |
Basic and Diluted Net Income pe
Basic and Diluted Net Income per Share | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net Income per Share | Note 13 - 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 plus unrecognized stock-based compensation obtained thereby were used by the Company to purchase common stock at the average market price during the period. The following is a reconciliation of the share data used in the basic and diluted income per share computations: Year ended December 31, 2019 2018 Basic: Weighted average shares outstanding 24,850,409 24,825,933 Diluted: Weighted average shares outstanding 24,850,409 24,825,933 Weighted average effects of dilutive securities 176,838 163,524 Total 25,027,247 24,989,457 Antidilutive securities: 283,459 270,700 The effect of the inclusion of the antidilutive shares would have resulted in an increase in earnings per share. Accordingly, the weighted average shares outstanding have not been adjusted for antidilutive shares. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 14 - Related Party Transactions In 2019 and 2018, we recorded total net revenue of approximately $5,000 and $7,900, respectively, from related parties. The related parties consisted of a business owned by the father of Leann Saunders, our President, and businesses owned by members of our Board of Directors. The Company leases its corporate headquarters from a company in which our CEO and President have a 24.3% jointly-held ownership interest (Note 15). Under the related party arrangement, approximately $464,500 and $490,600 was paid in rent and CAM for our corporate headquarters was included in the consolidated statements of income for the years ended December 31, 2019 and 2018, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 15 – Commitments and Contingencies Operating Leases & Lease Incentive Obligation The Company leases approximately 15,700 square feet of office space for its corporate headquarters. This space is being leased from The Move, LLC in which our CEO and President, each a related party to the Company, have a 24.3% jointly-held 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. Total rental payments are approximately $39,400 per month as of December 31, 2019. The rental payments include common area charges and are subject to annual increases over the term of the lease. Prior to 2018, the Company recorded leasehold improvements of approximately $425,000, which included approximately $163,000 in lease incentives. During the year ended December 31, 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 calculating the lease liability recorded on the balance sheet. In September 2017, the Company entered into a new lease agreement for our Urbandale, Iowa office space. The lease was for a period of two years and expired on August 31, 2019. This lease was extended for an additional 3 years, terminating on August 31, 2022. Rental payments are approximately $3,000 per month, which includes common area charges, and are not 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, the Company was charged a monthly rental rate of approximately $150 plus all insurance, taxes and other costs based on actual expenses to maintain the building. 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 expired on November 30, 2018 and was extended until February 28, 2019. It required rental payments of approximately $2,700 per month. 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 expired November 30, 2018. Rental payments were approximately $2,200 per month. In December 2018, we entered into a new lease agreement and relocated our offices in Soquel, Modesto and Pleasanton, California to San Ramon, California. The lease is for a period of sixty-six months and expires on May 1, 2024. Rental payments are approximately $5,900 per month as of December 31, 2019, which includes common area charges, and are subject to annual increases over the term of the lease. See Note 9 of our Consolidated Financial Statements for a detailed description of maturities of lease liabilities related to our leases. Legal Proceedings From time to time, we may become involved in various legal actions, administrative proceedings and claims in the ordinary course of business. We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. Employee Benefit Plan The Company has established a 401(k) plan for the benefit of our employees. The plan covers substantially all of our employees who have attained age 21. We may make a discretionary matching contribution in an amount that is determined by our Board of Directors. If a matching contribution is made, the amount cannot exceed the elective deferral contributions. For the years ended December 31, 2019 and 2018, we made aggregate matching contributions of approximately $168,700 and $174,700, respectively. Contingently Redeemable Non-Controlling Interest On December 28, 2016, we entered into an Asset Purchase Agreement (the “SureHarvest Purchase Agreement”), by and among the Company, SureHarvest Services LLC (the “Buyer” or “SureHarvest”); and SureHarvest, Inc., a California corporation (the “Seller”). We 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. Because SureHarvest, Inc. at its option, could require the Company to purchase its 40% interest in SureHarvest, the SureHarvest non-controlling interest met 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. On December 17, 2019 the Company exercised its option to acquire the remaining 40% membership interest in SureHarvest for $1,000,000 in cash and 303,951 shares of common stock of WFCF valued at approximately $547,000 based on the closing price of our stock on December 17, 2019 of $1.80 per share. Accordingly, the redeemable non-controlling interest is presented as zero at December 31, 2019. The table below reflects the activity of the contingently redeemable non-controlling interest: Balance, January 1, 2018 $ 1,574,765 Net loss attributable to non-controlling interest in SureHarvest for the year to date period ended December 31, 2018 (125,758 ) Balance, December 31, 2018 $ 1,449,007 Net loss attributable to non-controlling interest in SureHarvest for the year to date period ended December 17, 2019 (322,195 ) Acquisition of non-controlling interest in SureHarvest on December 17, 2019 Cash paid (1,000,000 ) Fair market value of stock (547,112 ) Adjustment to additional paid-in capital 420,300 Balance, December 31, 2019 $ — |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 12 Months Ended |
Dec. 31, 2019 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | Note 16 – Supplemental Cash Flow Information Year ended December 31, 2019 2018 Cash paid during the year: Interest expense $ 10,057 $ 4,837 Income taxes $ 343,818 $ 759,300 Non-cash investing and financing activites: Common stock issued in connection with acquisition of non-controlling interest in SureHarvest Services, LLC $ 547,112 $ — 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 Lease incentive obligation $ — $ 230,220 |
Segments
Segments | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Segments | Note 17 - 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 reportable segment. The operating segments included in the aggregated verification and certification segment include IMI Global, ICS, and Validus. 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 also determined that it has a software sales and related consulting reportable segment. SureHarvest, which includes Sow Organic and JVF Consulting, is the sole operating segment. This segment includes software license, maintenance, support and software-related consulting service revenues. The Company’s chief operating decision maker (the Company’s CEO) allocates resources and assesses the performance of its operating segments. Segment 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: Year ended December 31, 2019 Year ended December 31, 2018 Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Assets: Intangible and other assets, net $ 1,303,795 $ 1,943,900 $ 3,247,695 $ 1,464,435 $ 2,387,686 $ — $ 3,852,121 Goodwill 1,133,122 1,812,613 2,945,735 1,133,122 2,010,612 — 3,143,734 Total assets 13,236,311 5,001,150 18,237,461 9,178,009 5,285,929 — 14,463,938 Revenues: Verification and certification service revenue $ 15,564,411 $ — $ — $ 15,564,411 $ 13,743,311 $ — $ — $ 13,743,311 Product sales 3,300,799 — — 3,300,799 2,266,771 — — 2,266,771 Software license, maintenance and support services revenue — 1,273,820 (207,277 ) 1,066,543 — 993,161 — 993,161 Software-related consulting service revenue — 947,524 (104,861 ) 842,663 — 800,316 — 800,316 Total revenues $ 18,865,210 $ 2,221,344 $ (312,138 ) $ 20,774,416 $ 16,010,082 $ 1,793,477 $ — $ 17,803,559 Costs of revenues: Costs of verification and certification services 8,628,292 — (183,983 ) 8,444,309 7,564,946 — — 7,564,946 Costs of products 2,148,564 — — 2,148,564 1,438,648 — — 1,438,648 Costs of software license, maintenance and support services — 615,248 — 615,248 — 644,746 — 644,746 Costs of software-related consulting services — 486,880 — 486,880 — 411,468 — 411,468 Total costs of revenues 10,776,856 1,102,128 (183,983 ) 11,695,001 9,003,594 1,056,214 — 10,059,808 Gross profit 8,088,354 1,119,216 (128,155 ) 9,079,415 7,006,488 737,263 — 7,743,751 Depreciation & amortization 373,583 722,877 — 1,096,460 320,094 622,324 — 942,418 Other operating expenses 5,624,489 934,250 (128,155 ) 6,430,584 5,245,707 681,073 — 5,926,780 Segment operating (loss)/income $ 2,090,282 $ (537,911 ) $ — $ 1,552,371 $ 1,440,687 $ (566,134 ) $ — $ 874,553 Other items to reconcile segment operating income (loss) to net income attributable to WFCF: Other expense (income) (92,584 ) 161,985 — 69,401 — — (109,433) (109,433) Income tax (benefit)/expense — — 460,000 460,000 — — 309,008 309,008 Net loss attributable to non-controlling interest — 322,195 — 322,195 — 125,758 — 125,758 Net (loss)/income attributable to WFCF $ 2,182,866 $ (377,701 ) $ (460,000 ) $ 1,345,165 $ 1,440,687 $ (440,376 ) $ (199,575) $ 800,736 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 18 – Subsequent Events On February 21, 2020 the Company acquired all of the stock of privately held Postelsia Holdings, Ltd. (“Postelsia”) for $300,000 in cash. Postelsia, based in Victoria, British Columbia, is a leader in the emerging field of environmental and social sustainability programs for the seafood industry. Postelsia provides a range of programs and consulting services designed to improve and promote sustainable practices, including environmental conservation, worker care, and food safety compliance. Postelsia will operate as a wholly owned subsidiary of the Company. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Cash and Cash Equivalents | Cash and Cash Equivalents We place our cash with high quality financial institutions. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit; however, we have not experienced any losses related to balances that exceed such FDIC insurance limits (currently $250,000), and we believe our credit risk is minimal. At times, we may also invest in short-term investments with original maturities of three months or less, which we consider to be cash and cash equivalents, since they are readily convertible to cash. |
Short-Term Investments in certificates of deposit | Short-Term Investments in certificates of deposit Certificates of deposit with original maturities greater than three months and remaining maturities less than one year are classified as “short-term investments.” |
Long-Term Investments in certificates of deposit | Long-Term Investments in certificates of deposit Certificates of deposit with original maturities greater than three months and remaining maturities greater than one year are classified as “long-term investments.” As of December 31, 2019, the previous long-term investments fully mature in May 2020 and have been reclassed to short-term investments in certificates of deposit. |
Revenue Recognition | 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 the 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 customers 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 the 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 the 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 related to consulting services 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. 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. Year ended December 31, 2019 Year ended December 31, 2018 Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Revenues: Verification and certification service revenue $ 15,564,411 $ — $ — $ 15,564,411 $ 13,743,311 $ — $ — $ 13,743,311 Product sales 3,300,799 — — 3,300,799 2,266,771 — — 2,266,771 Software license, maintenance and support services revenue — 1,273,820 (207,277 ) 1,066,543 — 993,161 — 993,161 Software-related consulting service revenue — 947,524 (104,861 ) 842,663 — 800,316 — 800,316 Total revenues $ 18,865,210 $ 2,221,344 $ (312,138 ) $ 20,774,416 $ 16,010,082 $ 1,793,477 $ — $ 17,803,559 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 December 31, 2019, and January 1, 2019, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $2.5 million and $2.2 million, respectively. As of December 31, 2019, and January 1, 2019, deferred revenue from contracts with customers were approximately $0.8 million and $0.7 million, respectively. The balance of the contract liabilities at December 31, 2018 was recognized as revenue in 2019 and the balance at December 31, 2019 is expected to be recognized as revenue during 2020. The following table reflects the changes in our contract liabilities during the year ended December 31, 2019: Deferred revenue: Unearned revenue January 1, 2019 $ 654,873 Unearned billings 2,683,647 Revenue recognized (2,541,487 ) Unearned revenue December 31, 2019 $ 797,033 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 discussed in Note 3, on August 30, 2018, we acquired 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 December 31, 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 years-ended December 31, 2019 and 2018. In addition, amortization of capitalized set-up costs for the year ended December 31, 2018 was not material, and no impairment loss was incurred related to capitalized set-up costs for the year ended December 31, 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. |
Cost of Revenues | Cost of Revenues Salaries and related fringe benefits directly associated with our verification and certification service revenues are allocated to costs of verification and certification services. Costs of products primarily represents the cost of livestock ear tags generally used in connection with our verification programs. Livestock identification ear tags sold in connection with our verification offerings are purchased primarily from one supplier. However, there are numerous other companies which manufacture and market such ear tags. Costs of product support, including web-hosting fees, salaries and related fringe benefits directly associated with our software license, maintenance and support services, are allocated to costs of software license, maintenance and support services. Salaries and related fringe benefits directly associated with our software-related consulting revenues are allocated to costs of software-related consulting services. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Our receivables are generally due from trade customers. Credit is extended based on our evaluation of the customer’s financial condition, and generally collateral is not required. Accounts receivable are generally due approximately 30 days from the invoice date and are stated at amounts due from customers, net of an allowance for doubtful accounts. Accounts receivable that are outstanding longer than the contractual payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss and payment history, the customer’s current ability to pay its obligations to us and the condition of the general economy and the industry as a whole. We write-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The allowance for doubtful accounts was approximately $75,700 and $65,400, at December 31, 2019 and 2018, respectively. No single customer accounted for greater than 10% of our accounts receivable balances at December 31, 2019 and 2018. |
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurements and Disclosure, establishes a hierarchy for inputs used in measuring fair value for financial assets and liabilities that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows: ● Level 1: Quoted prices available in active markets for identical assets or liabilities; ● Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; ● Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash or valuation models. The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The Company’s non-recurring fair value measurements include purchase price allocations for the fair value of assets and liabilities acquired through business combinations. Please refer to Note 3 for further discussion of business combinations. The acquisition of a group of assets in a business combination transaction requires fair value estimates for assets acquired and liabilities assumed. The fair value of assets and liabilities acquired through business combinations is calculated using a discounted future cash flows method. The discounted cash flows are developed using the income approach in which a value (based on management’s expectations for the future) is determined by converting anticipated benefits. The fair value measurements are based on significant inputs not observable in the market and thus represent fair value measurements which are designated as Level 3 inputs within the fair value hierarchy. Key assumptions and considerations include: a) A discount rate range of 19-32 percent; b) Terminal value based on long-term sustainable growth rates of 3 percent; c) Financial data of comparable companies for market participant assumptions; and d) Consideration of the marketability that market participants would consider when measuring the fair value of a non-controlling interest in our acquisition. |
Other Financial Instruments | Other Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value due to their short maturities. The carrying values shown for short-term investments, long-term investments and notes payable also approximate fair value because current interest rates and terms offered to us for similar instruments are substantially the same (Level 2 inputs). |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful-lives of the respective assets. Land is not depreciated. Buildings are depreciated over 15 to 20 years. Leasehold improvements are depreciated over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful-lives of the assets. All other property and equipment have depreciable lives which range from two to seven years. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and the related gain or loss is reflected in earnings. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses at the acquisition date, after amounts allocated to other identifiable intangible assets. Factors that contribute to the recognition of goodwill include synergies that are specific to our business and not available to other market participants and are expected to increase net sales and profits; acquisition of a talented workforce; cost savings opportunities; the strategic benefit of expanding our presence in core and adjacent markets; and diversifying our product portfolio. The fair values of other identifiable intangible assets are primarily determined using the income approach. Other intangible assets include, but are not limited to, developed technology, customer relationships, accreditations, a beneficial lease arrangement, and tradenames/trademarks and patents. Intangible assets with determinable useful-lives are amortized on a straight-line basis over their estimated useful-lives of two to 15 years. Certain acquired trade names are considered to have indefinite lives and are not amortized but are assessed annually for potential impairment as described below. |
Goodwill, Intangibles and Long-Lived Asset Impairment Tests | Goodwill, Intangibles and Long-Lived Asset Impairment Tests We perform our annual impairment test for goodwill in the fourth quarter of each year. We consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill. In certain circumstances, we may also utilize a discounted cash flow analysis that requires certain assumptions and estimates be made regarding market conditions and our future profitability. Indefinite-lived intangible assets are also tested at least annually for impairment by comparing the individual carrying values to the fair value. We review long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows. Undiscounted cash flows expected to be generated by the related assets are estimated over the asset’s useful life based on updated projections. If the evaluation indicates that the carrying amount of the asset may not be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique. |
Research and Development and Software Development Costs | Research and Development and Software Development Costs Research and development costs are charged to operations as incurred. We did not incur any research and development expense in 2019 and 2018. Internal use software development costs represent the capitalization of certain external and internal computer software costs incurred during the application development stage. The application development stage is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Website software development costs related to certain planning and training costs incurred in the development of website software are expensed as incurred, while application development stage costs are capitalized. Software development costs for external sale are capitalized once technological feasibility is achieved. Capitalized costs are amortized over the expected benefit period. We generally expense a significant portion of software development costs because technological feasibility occurs very late in the software development process. In connection with our acquisitions (Note 3), software developed for external sale with an estimated fair value of approximately $921,000 is included in property and equipment at both December 31, 2019 and 2018. During 2019 and 2018, the amortization of capitalized costs totaled approximately $256,000 and $222,000, respectively, and is included in depreciation expense (Note 4). |
Advertising and Marketing Expenses | Advertising and Marketing Expenses Advertising and marketing costs are expensed as incurred. Total advertising and marketing expenses for the years ended December 31, 2019 and 2018, were approximately $466,400 and $477,300, respectively. |
Income Taxes | Income Taxes We record income taxes under the asset and liability method. Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect when we realize the underlying items of income and expense. We consider all relevant factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income and the carryforward periods available to us for tax reporting purposes, as well as assessing available tax planning strategies. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates. The accounting standard related to income taxes applies to all tax positions and defines the confidence level that a tax position must meet in order to be recognized in the financial statements. The accounting standard requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If a tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are to be recognized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits. This standard also provides guidance on the presentation of tax matters and the recognition of potential Internal Revenue Service interest and penalties. As of December 31, 2019 and 2018, the Company did not have an unrecognized tax liability. The Company classifies penalty and interest expense related to income tax liabilities as an income tax expense. The Company did not incur any interest and penalties for the years ended December 31, 2019 and 2018. The Company files income tax returns in the U.S. and various state jurisdictions, and there are open statutes of limitation for taxing authorities to audit our tax returns from 2015 through the current period. |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes all equity-based compensation as stock-based compensation expense based on the fair value of the compensation measured at the grant date. For stock options, fair value is calculated 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. Calculating stock-based compensation expense using the Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the expected term of the stock-based awards, stock price volatility, and the pre-vesting option forfeiture rate. We consider many factors when estimating expected forfeitures, including the types of awards, employee classification and historical experience. Actual forfeitures may differ substantially from our current estimate. Under this pricing model, which incorporates ranges of assumptions for inputs, our assumptions are as follows: ● Dividend yield is based on our historical policy of not paying cash dividends. ● Expected volatility assumptions were derived from our actual volatilities. ● The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant with maturity dates approximately equal to the expected term at the grant date. ● The expected term of options represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules, based on historical exercise patterns, which we believe are representative of future behavior. |
Leases | Leases We adopted ASU 2016-02: Leases (Topic 842) as of January 1, 2019. We determine if an arrangement is a lease at inception. Operating leases are included in the right-of-use (ROU) assets, current operating lease liabilities and noncurrent operating lease liabilities in our consolidated balance sheet. Finance leases are included in property and equipment, current finance lease obligations and long-term finance lease obligations in our consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. As the discount rates in the Company’s lease are not implicit, the Company estimated the incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term. Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees. We have operating and finance leases for corporate offices, other regional offices, and certain equipment. Our leases have remaining lease terms of 1 year to 15 years, some of which include multiple options to extend the leases for up to 5 years each. |
Recent Accounting Pronouncements | 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 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: Year ended December 31, 2018 Under ASC Under ASC Increase / 606 605 (Decrease) Revenues: Verification and certification service revenue $ — $ 170,340 $ (170,340 ) Costs and expenses: Cost of verification and certification services $ — $ 170,340 $ (170,340 ) 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. On January 1, 2018 we adopted 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 adoption of this update did not have a material impact on our Consolidated Financial Statements. On January 1, 2018 we adopted ASU 2017-09, Compensation - Stock Compensation, which revises the guidance related to changes in terms or conditions of a share-based payment award. The adoption of this update did not have a material impact on our Consolidated Financial Statements. On January 1, 2019, we adopted ASU 2017-09, Leases, which requires 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. Additionally, we elected the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods. The adoption of this update did have a material impact on assets and liabilities on the balance sheet as the standard requires the recognition of a right of use asset and corresponding lease liability. However, the adoption dd not have a material impact to our consolidated results of operations or statement of cash flows. On January 1, 2019, we adopted 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. The adoption of this update did not have a material impact on our Consolidated Financial Statements. Recently Issued Accounting Pronouncements In September 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 currently required to adopt the new standard in 2023. In April 2017, the FASB 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 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. The Company has performed its analysis and determined there will be no material impact to the Company’s financial statements with the implementation of this standard. In August 2018 the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract to align with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. There will be no material impact to the Company’s financial statements with the implementation of this standard. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Schedule of revenue attributable to each of our identified revenue categories | Revenue attributable to each of our identified revenue categories is disaggregated in the table below. Year ended December 31, 2019 Year ended December 31, 2018 Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Revenues: Verification and certification service revenue $ 15,564,411 $ — $ — $ 15,564,411 $ 13,743,311 $ — $ — $ 13,743,311 Product sales 3,300,799 — — 3,300,799 2,266,771 — — 2,266,771 Software license, maintenance and support services revenue — 1,273,820 (207,277 ) 1,066,543 — 993,161 — 993,161 Software-related consulting service revenue — 947,524 (104,861 ) 842,663 — 800,316 — 800,316 Total revenues $ 18,865,210 $ 2,221,344 $ (312,138 ) $ 20,774,416 $ 16,010,082 $ 1,793,477 $ — $ 17,803,559 |
Schedule of changes in contract liabilities | The following table reflects the changes in our contract liabilities during the year ended December 31, 2019: Deferred revenue: Unearned revenue January 1, 2019 $ 654,873 Unearned billings 2,683,647 Revenue recognized (2,541,487 ) Unearned revenue December 31, 2019 $ 797,033 |
Schedule of impact of adoption ASU 606 | The impact of adoption on our current period results is as follows: Year ended December 31, 2018 Under ASC Under ASC Increase / 606 605 (Decrease) Revenues: Verification and certification service revenue $ — $ 170,340 $ (170,340 ) Costs and expenses: Cost of verification and certification services $ — $ 170,340 $ (170,340 ) Gross profit $ — $ — $ — Net income (loss) $ — $ — $ — Retained earnings $ — $ — $ — |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations [Abstract] | |
Schedule of acquisitions | 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 December 31, 2018. Sow Organic, LLC: May 16, 2018 (as reported) Adjustments May 16, 2018 (as adjusted) Software acquired $ 445,000 (289,000 ) $ 156,000 Identifiable 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 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 August 30, 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 December 31, 2018. JVF Consulting, LLC: August 30, 2018 Adjustments August 30, 2018 (as adjusted) Software acquired $ 250,000 (43,000 ) $ 207,000 Identifiable intangible assets: Tradenames and trademarks 5,290 81,710 87,000 Non-compete agreements 10,000 27,000 37,000 Customer relationships 100,000 4,000 104,000 Goodwill 450,000 (69,710 ) 380,290 Total consideration $ 815,290 $ 815,290 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | The major categories of property and equipment are as follows as of December 31st: 2019 2018 Automobiles $ 115,127 $ 130,841 Furniture and office equipment 539,122 419,014 Software and tools 1,449,216 1,299,454 Website development and other enhancements 183,385 183,385 Building and leasehold improvements 992,386 984,058 Land 2,436 2,436 3,281,672 3,019,188 Less accumulated depreciation 1,736,378 1,343,716 Property and equipment, net $ 1,545,294 $ 1,675,472 |
Intangible and Other Assets (Ta
Intangible and Other Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible and other assets | The following table summarizes our intangible assets as of: December 31, December 31, Estimated 2019 2018 Useful Life Intangible assets subject to amortization: Tradenames and trademarks $ 417,307 $ 417,307 2.5 - 8.0 years Accreditations 85,395 85,395 5.0 years Customer relationships 3,350,551 3,350,551 3.0 - 15.0 years Patents 970,100 970,100 4.0 years Non-compete agreements 121,000 121,000 5.0 years 4,944,353 4,944,353 Less accumulated amortization 2,181,984 1,577,558 2,762,369 3,366,795 Tradenames/trademarks (not subject to amortization) 465,000 465,000 3,227,369 3,831,795 Other assets 20,326 20,326 Intangible and other assets: $ 3,247,695 $ 3,852,121 |
Schedule of future scheduled amortization | As of December 31, 2019, future scheduled amortization of intangible assets is as follows: Fiscal year ending December 31: 2020 579,925 2021 330,666 2022 318,106 2023 277,636 2024 266,403 Thereafter 989,634 $ 2,762,370 |
Goodwill (Tables)
Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of changes in the net carrying value of goodwill by segment | Changes in the net carrying value of goodwill by segment are as follows: Verification and Certification Segment Software Sales and Related Consulting Segment Consolidated January 1, 2018 $ 1,279,762 $ 1,372,488 $ 2,652,250 Additions — 813,421 813,421 Adjustments (146,640 ) (175,297 ) (321,937 ) December 31, 2018 $ 1,133,122 $ 2,010,612 $ 3,143,734 Additions — — — Impairment — (198,000 ) (198,000 ) December 31, 2019 $ 1,133,122 $ 1,812,612 $ 2,945,734 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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: December 31, 2019 December 31, 2018 Income and sales taxes payable $ 170,850 $ 19,978 Payroll related accruals 201,015 147,798 Customer deposits 62,305 72,982 Professional fees and other expenses 239,598 251,843 $ 673,768 $ 492,601 |
Notes Payable and Lease Oblig_2
Notes Payable and Lease Obligations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Notes Payable and Lease Obligations [Abstract] | |
Schedule of notes payable | December 31, 2019 December 31, 2018 Vehicle note $ — $ 42,393 Less current portion of notes payable and other long-term debt — (10,173 ) Notes payable and other long-term debt $ — $ 32,220 |
Schedule of lease expense | The components of lease expense were as follows: Year ended December 31, 2019 Operating lease cost $ 469,231 Finance lease cost Amortization of assets 8,406 Interest on finance lease obligations 7,298 Variable lease cost — Total net lease cost $ 484,935 |
Schedule of supplemental balance sheet information related to leases | Supplemental balance sheet information related to leases was as follows: December 31, 2019 Operating leases: Related Party Other Total Right of use asset $ 2,932,803 $ 314,433 $ 3,247,236 Current operating lease liabilities 158,306 81,213 239,519 Noncurrent operating lease liabilities 3,259,509 265,954 3,525,462 Total operating lease liabilities $ 3,417,815 $ 347,167 $ 3,764,981 Finance leases: December 31, 2019 Right of use asset, at cost $ 43,041 Accumulated amortization (21,934 ) Right of use asset, net $ 21,107 Current obligations of finance leases $ 8,317 Finance leases, net of current obligations 21,405 Total finance lease liabilities $ 29,722 Weighted average remaining lease term (in years): Operating leases 11.0 Finance leases 3.0 Weighted average discount rate: Operating leases 5.8 % Finance leases 20.8 % |
Schedule of supplemental cash flow information related to leases | Supplemental cash flow and other information related to leases was as follows: Year ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 430,359 Operating cash flows from finance leases $ 7,298 Financing cash flows from finance leases $ 6,634 Right of use assets obtained in exchange for lease liabilities: Operating leases $ 3,513,347 |
Schedule of maturities of lease liabilities | Maturities of lease liabilities were as follows: Years Ending December 31st, Operating Leases Finance Leases 2020 $ 448,992 $ 13,597 2021 461,657 12,355 2022 465,759 10,051 2023 461,310 4,514 2024 407,133 — Thereafter 2,901,022 — Total lease payments 5,145,873 40,517 Less amount representing interest (1,380,892 ) (10,795 ) Total lease obligations 3,764,981 29,722 Less current portion (239,519 ) (8,317 ) Long-term lease obligations $ 3,525,462 $ 21,405 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of provision for income taxes | The provision for income taxes consists of the following: December 31, 2019 2018 Current income tax expense: Federal $ 438,528 $ 334,526 State 81,681 70,783 Total current income tax expense 520,209 405,309 Deferred income tax benefit: Federal (51,419 ) (82,241 ) State (8,790 ) (14,060 ) Total deferred income tax benefit (60,209 ) (96,301 ) Total income tax expense $ 460,000 $ 309,008 |
Schedule of reconciliation of income taxes | The reconciliation of income taxes calculated at the statutory rates to our effective tax rate is as follows: December 31, 2019 2018 Expected tax expense $ 320,808 $ 196,428 State tax provision, net 54,843 41,227 Permanent differences 11,030 6,765 Minority interest 75,785 30,924 Other, net (2,466 ) 33,664 Total income tax expense $ 460,000 $ 309,008 |
Schedule of deferred tax assets (liabilities) | The income tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows: December 31, 2019 2018 Deferred tax assets (liabilities): Accruals, stock-based compensation and other $ 181,062 $ 162,430 Property and equipment (14,654 ) (67,676 ) Intangibles assets 211,520 81,169 Net deferred tax assets 377,928 175,923 |
Stock Buyback Plan (Tables)
Stock Buyback Plan (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Schedule of stock buyback plan | Activity under the Stock Buyback Plan by year is as follows: Number of Shares Cost of Shares Average Cost per Share Balance, January 1, 2018 319,789 $ 724,530 $ 2.27 Shares purchased during 2018 185,070 384,531 2.08 Balance, December 31, 2018 504,859 1,109,061 2.20 Shares purchased during 2019 319,863 555,429 1.74 Balance, December 31, 2019 824,722 $ 1,664,490 $ 2.02 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock-based compensation expense | The amount of stock-based compensation expense is as follows: Year ended December 31, 2019 2018 Stock options $ 146,731 $ 94,751 Restricted stock awards 15,674 66,377 Total $ 162,405 $ 161,128 |
Schedule of unrecognized compensation cost from unvested awards | As of December 31, 2019, the estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows: Years ended December 31st: Unvested stock options Unvested restricted stock awards Total unrecognized compensation expense 2020 $ 113,378 $ 4,251 $ 117,629 2021 70,896 706 71,602 2022 3,722 — 3,722 2023 — — — $ 187,996 $ 4,957 $ 192,953 |
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: Year ended December 31, 2019 2018 Number of options awarded to purchase common shares 10,000 183,750 Risk-free interest rate 1.50% 2.6% - 3.0% Expected volatility 100.3% 115.9 - 154.3% Assumed dividend yield N/A N/A Expected life of options from the date of grant 9.8 years 9.8 years |
Schedule of stock option activity under Equity Incentive Plan | Stock option activity during 2019 and 2017 is summarized as follows: Number of awards Weighted avg. exercise price per share Weighted avg. grant date fair value per share Weighted avg. remaining contractual life (in years) Aggregate intrinsic value Outstanding, January 1, 2018 266,585 $ 1.23 $ 1.22 6.06 $ 462,508 Granted 183,750 $ 1.91 $ 1.85 9.68 Exercised — $ — $ — — Expired/Forfeited (15,884 ) $ 1.85 $ 1.83 7.86 Outstanding, December 31, 2018 434,451 $ 1.49 $ 1.47 6.91 $ 230,039 Granted 10,000 $ 1.71 $ 1.53 9.80 Exercised — $ — $ — — Expired/Forfeited (7,325 ) $ 1.86 $ 1.83 7.55 Outstanding, December 31, 2019 437,126 $ 1.46 $ 1.49 5.97 $ 150,417 Exercisable, December 31, 2019 $ 310,728 Unvested, December 31, 2019 $ 126,398 |
Schedule of restricted stock activity under Equity Incentive Plan | The following table summarizes activity for restricted stock awards for the fiscal years presented: Number of options Weighted avg. grant date fair value Non-vested restricted shares, January 1, 2018 99,000 $ 2.56 Granted 5,000 $ 2.55 Vested (74,000 ) $ 2.63 Forfeited — $ — Non-vested restricted shares, December 31, 2018 30,000 $ 2.38 Granted — $ — Vested (25,000 ) $ 2.35 Forfeited — $ — Non-vested restricted shares, December 31, 2019 5,000 $ 2.55 |
Basic and Diluted Net Income _2
Basic and Diluted Net Income per Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliation of basic and diluted income per share computations | The following is a reconciliation of the share data used in the basic and diluted income per share computations: Year ended December 31, 2019 2018 Basic: Weighted average shares outstanding 24,850,409 24,825,933 Diluted: Weighted average shares outstanding 24,850,409 24,825,933 Weighted average effects of dilutive securities 176,838 163,524 Total 25,027,247 24,989,457 Antidilutive securities: 283,459 270,700 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of redeemable noncontrolling interest | The table below reflects the activity of the contingently redeemable non-controlling interest: Balance, January 1, 2018 $ 1,574,765 Net loss attributable to non-controlling interest in SureHarvest for the year to date period ended December 31, 2018 (125,758 ) Balance, December 31, 2018 $ 1,449,007 Net loss attributable to non-controlling interest in SureHarvest for the year to date period ended December 17, 2019 (322,195 ) Acquisition of non-controlling interest in SureHarvest on December 17, 2019 Cash paid (1,000,000 ) Fair market value of stock (547,112 ) Adjustment to additional paid-in capital 420,300 Balance, December 31, 2019 $ — |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Supplemental Cash Flow Information [Abstract] | |
Schedule of supplemental cash flow information | Year ended December 31, 2019 2018 Cash paid during the year: Interest expense $ 10,057 $ 4,837 Income taxes $ 343,818 $ 759,300 Non-cash investing and financing activites: Common stock issued in connection with acquisition of non-controlling interest in SureHarvest Services, LLC $ 547,112 $ — 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 Lease incentive obligation $ — $ 230,220 |
Segments (Tables)
Segments (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of operating segments | The following table shows information for reportable operating segments: Year ended December 31, 2019 Year ended December 31, 2018 Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Verification and Certification Segment Software Sales and Related Consulting Segment Eliminations and Other Consolidated Totals Assets: Intangible and other assets, net $ 1,303,795 $ 1,943,900 $ 3,247,695 $ 1,464,435 $ 2,387,686 $ — $ 3,852,121 Goodwill 1,133,122 1,812,613 2,945,735 1,133,122 2,010,612 — 3,143,734 Total assets 13,236,311 5,001,150 18,237,461 9,178,009 5,285,929 — 14,463,938 Revenues: Verification and certification service revenue $ 15,564,411 $ — $ — $ 15,564,411 $ 13,743,311 $ — $ — $ 13,743,311 Product sales 3,300,799 — — 3,300,799 2,266,771 — — 2,266,771 Software license, maintenance and support services revenue — 1,273,820 (207,277 ) 1,066,543 — 993,161 — 993,161 Software-related consulting service revenue — 947,524 (104,861 ) 842,663 — 800,316 — 800,316 Total revenues $ 18,865,210 $ 2,221,344 $ (312,138 ) $ 20,774,416 $ 16,010,082 $ 1,793,477 $ — $ 17,803,559 Costs of revenues: Costs of verification and certification services 8,628,292 — (183,983 ) 8,444,309 7,564,946 — — 7,564,946 Costs of products 2,148,564 — — 2,148,564 1,438,648 — — 1,438,648 Costs of software license, maintenance and support services — 615,248 — 615,248 — 644,746 — 644,746 Costs of software-related consulting services — 486,880 — 486,880 — 411,468 — 411,468 Total costs of revenues 10,776,856 1,102,128 (183,983 ) 11,695,001 9,003,594 1,056,214 — 10,059,808 Gross profit 8,088,354 1,119,216 (128,155 ) 9,079,415 7,006,488 737,263 — 7,743,751 Depreciation & amortization 373,583 722,877 — 1,096,460 320,094 622,324 — 942,418 Other operating expenses 5,624,489 934,250 (128,155 ) 6,430,584 5,245,707 681,073 — 5,926,780 Segment operating (loss)/income $ 2,090,282 $ (537,911 ) $ — $ 1,552,371 $ 1,440,687 $ (566,134 ) $ — $ 874,553 Other items to reconcile segment operating income (loss) to net income attributable to WFCF: Other expense (income) (92,584 ) 161,985 — 69,401 — — (109,433) (109,433) Income tax (benefit)/expense — — 460,000 460,000 — — 309,008 309,008 Net loss attributable to non-controlling interest — 322,195 — 322,195 — 125,758 — 125,758 Net (loss)/income attributable to WFCF $ 2,182,866 $ (377,701 ) $ (460,000 ) $ 1,345,165 $ 1,440,687 $ (440,376 ) $ (199,575) $ 800,736 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 20,774,416 | $ 17,803,559 |
Verification and Certification Service Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 15,564,411 | 13,743,311 |
Product Sales [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 3,300,799 | 2,266,771 |
Software License, Maintenance and Support Services Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 1,066,543 | 993,161 |
Software-Related Consulting Service Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 842,663 | 800,316 |
Operating Segments [Member] | Verification and Certification Segment [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 18,865,210 | 16,010,082 |
Operating Segments [Member] | Verification and Certification Segment [Member] | Verification and Certification Service Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 15,564,411 | 13,743,311 |
Operating Segments [Member] | Verification and Certification Segment [Member] | Product Sales [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 3,300,799 | 2,266,771 |
Operating Segments [Member] | Software Sales and Related Consulting Segment [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 2,221,344 | 1,793,477 |
Operating Segments [Member] | Software Sales and Related Consulting Segment [Member] | Software License, Maintenance and Support Services Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 1,273,820 | 993,161 |
Operating Segments [Member] | Software Sales and Related Consulting Segment [Member] | Software-Related Consulting Service Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 947,524 | $ 800,316 |
Eliminations and Other [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | (312,138) | |
Eliminations and Other [Member] | Software License, Maintenance and Support Services Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | (207,277) | |
Eliminations and Other [Member] | Software-Related Consulting Service Revenue [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ (104,861) |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Deferred revenue: | |
Unearned revenue, beginning balance | $ 654,873 |
Unearned billings | 2,683,647 |
Revenue recognized | (2,541,487) |
Unearned revenue, ending balance | $ 797,033 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues: | ||
Total revenues | $ 20,774,416 | $ 17,803,559 |
Costs of revenues: | ||
Total costs of revenues | 11,695,001 | 10,059,808 |
Verification and Certification Service Revenue [Member] | ||
Revenues: | ||
Total revenues | 15,564,411 | 13,743,311 |
Costs of revenues: | ||
Total costs of revenues | $ 8,444,309 | 7,564,946 |
Under ASC 605 [Member] | Verification and Certification Service Revenue [Member] | ||
Revenues: | ||
Total revenues | 170,340 | |
Costs of revenues: | ||
Total costs of revenues | 170,340 | |
Increase / (Decrease) [Member] | Verification and Certification Service Revenue [Member] | ||
Revenues: | ||
Total revenues | (170,340) | |
Costs of revenues: | ||
Total costs of revenues | $ (170,340) |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details Narrative) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
Cash FDIC insured amount | $ 250,000 | $ 250,000 | ||
Accounts receivable, net of allowance | 2,515,244 | $ 2,205,162 | 2,515,244 | $ 2,205,162 |
Deferred revenue from contracts with customers | 797,033 | 654,873 | 797,033 | 654,873 |
Allowance for doubtful accounts | $ 75,700 | $ 65,400 | 75,700 | 65,400 |
Amortization of capitalized software costs | 256,000 | 222,000 | ||
Advertising expense | $ 466,400 | 477,300 | ||
Accounts Receivable Concentration [Member] | ||||
Threshold for significant customer identification | 10.00% | 10.00% | ||
Minimum [Member] | ||||
Definite lived intangible assets useful life | 2 years | |||
Maximum [Member] | ||||
Definite lived intangible assets useful life | 15 years | |||
Discount Rate [Member] | Minimum [Member] | ||||
Fair value of assets and liabilities acquired, measurement input | 0.19 | 0.19 | ||
Discount Rate [Member] | Maximum [Member] | ||||
Fair value of assets and liabilities acquired, measurement input | 0.32 | 0.32 | ||
Long-term Sustainable Growth Rate [Member] | ||||
Fair value of assets and liabilities acquired, measurement input | 0.03 | 0.03 | ||
Building [Member] | Minimum [Member] | ||||
Depreciable lives | 15 years | |||
Building [Member] | Maximum [Member] | ||||
Depreciable lives | 20 years | |||
Other Property and Equipment [Member] | Minimum [Member] | ||||
Depreciable lives | 2 years | |||
Other Property and Equipment [Member] | Maximum [Member] | ||||
Depreciable lives | 7 years | |||
Software [Member] | ||||
Acquired software | $ 921,000 | $ 921,000 | $ 921,000 | $ 921,000 |
Business Acquisitions (Details)
Business Acquisitions (Details) - USD ($) | May 16, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 2,945,734 | $ 3,143,734 | $ 2,652,250 | |
Software [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | $ 921,000 | $ 921,000 | ||
Sow Organic [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 433,131 | |||
Total consideration | 883,131 | |||
Sow Organic [Member] | Tradenames and Trademarks [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 48,000 | |||
Sow Organic [Member] | Noncompete Agreements [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 84,000 | |||
Sow Organic [Member] | Customer Relationships [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 162,000 | |||
Sow Organic [Member] | As Reported [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 143,754 | |||
Goodwill | 294,377 | |||
Total consideration | 883,131 | |||
Sow Organic [Member] | Adjustments [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | (143,754) | |||
Goodwill | 138,754 | |||
Sow Organic [Member] | Adjustments [Member] | Tradenames and Trademarks [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 48,000 | |||
Sow Organic [Member] | Adjustments [Member] | Noncompete Agreements [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 84,000 | |||
Sow Organic [Member] | Adjustments [Member] | Customer Relationships [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 162,000 | |||
Sow Organic [Member] | Software [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | 156,000 | |||
Sow Organic [Member] | Software [Member] | As Reported [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | 445,000 | |||
Sow Organic [Member] | Software [Member] | Adjustments [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | $ (289,000) |
Business Acquisitions (Details
Business Acquisitions (Details 1) - USD ($) | Aug. 30, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 2,945,734 | $ 3,143,734 | $ 2,652,250 | |
Software [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | $ 921,000 | $ 921,000 | ||
JVF Consulting LLC [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | $ 380,290 | |||
Total consideration | 815,290 | |||
JVF Consulting LLC [Member] | Tradenames and Trademarks [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 87,000 | |||
JVF Consulting LLC [Member] | Noncompete Agreements [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 37,000 | |||
JVF Consulting LLC [Member] | Customer Relationships [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 104,000 | |||
JVF Consulting LLC [Member] | As Reported [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | 450,000 | |||
Total consideration | 815,290 | |||
JVF Consulting LLC [Member] | As Reported [Member] | Tradenames and Trademarks [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 5,290 | |||
JVF Consulting LLC [Member] | As Reported [Member] | Noncompete Agreements [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 10,000 | |||
JVF Consulting LLC [Member] | As Reported [Member] | Customer Relationships [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 100,000 | |||
JVF Consulting LLC [Member] | Adjustments [Member] | ||||
Business Acquisition [Line Items] | ||||
Goodwill | (69,710) | |||
JVF Consulting LLC [Member] | Adjustments [Member] | Tradenames and Trademarks [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 81,710 | |||
JVF Consulting LLC [Member] | Adjustments [Member] | Noncompete Agreements [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 27,000 | |||
JVF Consulting LLC [Member] | Adjustments [Member] | Customer Relationships [Member] | ||||
Business Acquisition [Line Items] | ||||
Identifiable intangible assets | 4,000 | |||
JVF Consulting LLC [Member] | Software [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | 207,000 | |||
JVF Consulting LLC [Member] | Software [Member] | As Reported [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | 250,000 | |||
JVF Consulting LLC [Member] | Software [Member] | Adjustments [Member] | ||||
Business Acquisition [Line Items] | ||||
Software acquired | $ (43,000) |
Business Acquisitions (Detail_2
Business Acquisitions (Details Narrative) - USD ($) | Dec. 17, 2019 | Aug. 30, 2018 | May 16, 2018 | Dec. 28, 2016 | Dec. 31, 2018 |
Value of shares issued upon acquisition | $ 433,131 | ||||
JVF Consulting LLC [Member] | |||||
Cash payments for acquisition | $ 500,000 | ||||
Number of shares issued upon acquisition, shares | 158,437 | ||||
Value of shares issued upon acquisition | $ 315,300 | ||||
Sow Organic [Member] | |||||
Cash payments for acquisition | $ 450,000 | ||||
Number of shares issued upon acquisition, shares | 217,654 | ||||
Value of shares issued upon acquisition | $ 433,100 | ||||
SureHarvest Services LLC [Member] | |||||
Cash payments for acquisition | $ 1,000,000 | $ 1,122,000 | |||
Number of shares issued upon acquisition, shares | 303,951 | 850,852 | |||
Value of shares issued upon acquisition | $ 547,000 | $ 1,534,900 | |||
Share price (in dollars per share) | $ 1.80 | ||||
Adjustments for deferred income tax | $ 102,000 | ||||
Reversal of allocation of net losses | $ 420,000 | ||||
Percentage of ownership interest acquired | 40.00% | 60.00% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 3,281,672 | $ 3,019,188 |
Less accumulated depreciation | 1,736,378 | 1,343,716 |
Property and equipment, net | 1,545,294 | 1,675,472 |
Automobiles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 115,127 | 130,841 |
Furniture and Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 539,122 | 419,014 |
Software and Tools [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,449,216 | 1,299,454 |
Website Development and Other Enhancements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 183,385 | 183,385 |
Building and Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 992,386 | 984,058 |
Land [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 2,436 | $ 2,436 |
Property and Equipment (Detai_2
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Depreciation | $ 472,600 | $ 372,300 |
Assets Held under Finance Leases [Member] | ||
Depreciation | $ 22,000 | $ 8,967 |
Investment in Progressive Bee_2
Investment in Progressive Beef, LLC (Details Narrative) - USD ($) | Aug. 09, 2018 | Dec. 31, 2019 | Dec. 31, 2018 |
Amount paid in cash | $ 900,000 | ||
Value of number of shares issued | 433,131 | ||
Dividend income | $ 120,000 | 100,000 | |
Progressive Beef, LLC [Member] | |||
Percentage of voting interests acquired | 10.00% | ||
Aggregate purchase price | $ 991,000 | ||
Amount paid in cash | $ 900,000 | ||
Number of shares issued (in shares) | 50,340 | ||
Value of number of shares issued | $ 91,100 | ||
Business acquisition, share price (in dollars per share) | $ 1.81 | ||
Dividend income | $ 120,000 | $ 100,000 |
Intangible and Other Assets (De
Intangible and Other Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Intangible assets subject to amortization, gross | $ 4,944,353 | $ 4,944,353 |
Less accumulated amortization | 2,181,984 | 1,577,558 |
Intangible assets subject to amortization, net | 2,762,369 | 3,366,795 |
Tradenames/trademarks (not subject to amortization) | 465,000 | 465,000 |
Intangible assets | 3,227,369 | 3,831,795 |
Other assets | 20,326 | 20,326 |
Intangible and other assets, net | $ 3,247,695 | 3,852,121 |
Minimum [Member] | ||
Estimated Useful Life | 2 years | |
Maximum [Member] | ||
Estimated Useful Life | 15 years | |
Tradenames and Trademarks [Member] | ||
Intangible assets subject to amortization, gross | $ 417,307 | 417,307 |
Tradenames and Trademarks [Member] | Minimum [Member] | ||
Estimated Useful Life | 2 years 6 months | |
Tradenames and Trademarks [Member] | Maximum [Member] | ||
Estimated Useful Life | 8 years | |
Accreditations [Member] | ||
Intangible assets subject to amortization, gross | $ 85,395 | 85,395 |
Estimated Useful Life | 5 years | |
Customer Relationships [Member] | ||
Intangible assets subject to amortization, gross | $ 3,350,551 | 3,350,551 |
Customer Relationships [Member] | Minimum [Member] | ||
Estimated Useful Life | 3 years | |
Customer Relationships [Member] | Maximum [Member] | ||
Estimated Useful Life | 15 years | |
Patents [Member] | ||
Intangible assets subject to amortization, gross | $ 970,100 | 970,100 |
Estimated Useful Life | 4 years | |
Noncompete Agreements [Member] | ||
Intangible assets subject to amortization, gross | $ 121,000 | $ 121,000 |
Estimated Useful Life | 5 years |
Intangible and Other Assets (_2
Intangible and Other Assets (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Future scheduled amortization for the fiscal year ending December 31 | ||
2020 | $ 579,925 | |
2021 | 330,666 | |
2022 | 318,106 | |
2023 | 277,636 | |
2024 | 266,403 | |
Thereafter | 989,634 | |
Intangible assets subject to amortization, net | $ 2,762,369 | $ 3,366,795 |
Intangible and Other Assets (_3
Intangible and Other Assets (Details Narrative) | 12 Months Ended | ||||
Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Jan. 12, 2018ft² | Dec. 31, 2017USD ($) | Dec. 31, 2012USD ($)aft² | |
Intangible assets subject to amortization | $ 2,762,369 | $ 3,366,795 | |||
Amortization expense | $ 604,400 | $ 570,100 | |||
North Dakota Office [Member] | |||||
Area of real property | ft² | 2,300 | ||||
North Dakota Office [Member] | Beneficial Lease Arrangement [Member] | |||||
Area of land owned, lease office space | a | 0.75 | ||||
Area of building leased | ft² | 2,300 | ||||
Intangible assets subject to amortization | $ 56,500 | $ 120,200 |
Goodwill (Details)
Goodwill (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill [Line Items] | ||
Beginning Balance | $ 3,143,734 | $ 2,652,250 |
Additions | 813,421 | |
Adjustments | (321,937) | |
Impairment | (198,000) | |
Ending Balance | 2,945,734 | 3,143,734 |
Verification and Certification Segment [Member] | ||
Goodwill [Line Items] | ||
Beginning Balance | 1,133,122 | 1,279,762 |
Adjustments | (146,640) | |
Ending Balance | 1,133,122 | 1,133,122 |
Software Sales and Related Consulting Segment [Member] | ||
Goodwill [Line Items] | ||
Beginning Balance | 2,010,612 | 1,372,488 |
Additions | 813,421 | |
Adjustments | (175,297) | |
Impairment | (198,000) | |
Ending Balance | $ 1,812,612 | $ 2,010,612 |
Goodwill (Details Narrative)
Goodwill (Details Narrative) | 12 Months Ended |
Dec. 31, 2019USD ($)yr | |
Impairment of goodwill | $ 198,000 |
SureHarvest Reporting Unit [Member] | |
Carrying value of net assets in excess of fair value, percentage | 4.00% |
Impairment of goodwill | $ 198,000 |
SureHarvest Reporting Unit [Member] | Discounted Cash Flows Projection Period [Member] | |
Reporting unit measurement input | yr | 14 |
SureHarvest Reporting Unit [Member] | Discount Rate [Member] | |
Reporting unit measurement input | 0.201 |
Accrued Expenses and Other Cu_3
Accrued Expenses and Other Current Liabilities (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Income and sales taxes payable | $ 170,850 | $ 19,978 |
Payroll related accruals | 201,015 | 147,798 |
Customer deposits | 62,305 | 72,982 |
Professional fees and other expenses | 239,598 | 251,843 |
Accrued Expenses and Other Current Liabilities | $ 673,768 | $ 492,601 |
Notes Payable and Lease Oblig_3
Notes Payable and Lease Obligations (Details) | Dec. 31, 2018USD ($) |
Debt Disclosure [Abstract] | |
Vehicle note | $ 42,393 |
Less current portion of notes payable and other long-term debt | (10,173) |
Notes payable and other long-term debt | $ 32,220 |
Notes Payable and Lease Oblig_4
Notes Payable and Lease Obligations (Details 1) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Leases [Abstract] | |
Operating lease cost | $ 469,231 |
Finance lease cost amortization of assets | 8,406 |
Interest on finance lease obligations | 7,298 |
Total net lease cost | $ 484,935 |
Notes Payable and Lease Oblig_5
Notes Payable and Lease Obligations (Details 2) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Operating leases: | ||
Right of use asset | $ 3,247,236 | |
Current operating lease liabilities | 239,519 | |
Noncurrent operating lease liabilities | 3,525,462 | |
Total operating lease liabilities | 3,764,981 | |
Finance leases: | ||
Right of use asset, at cost | 43,041 | |
Accumulated amortization | (21,934) | |
Right of use asset, net | 21,107 | |
Current obligations of finance leases | 8,317 | $ 11,309 |
Finance leases, net of current obligations | 21,405 | $ 32,747 |
Total finance lease liabilities | $ 29,722 | |
Weighted average remaining lease term (in years): | ||
Operating leases | 11 years | |
Finance leases | 3 years | |
Weighted average discount rate: | ||
Operating leases | 5.80% | |
Finance leases | 20.80% | |
Related Party [Member] | ||
Operating leases: | ||
Right of use asset | $ 2,932,803 | |
Current operating lease liabilities | 158,306 | |
Noncurrent operating lease liabilities | 3,259,509 | |
Total operating lease liabilities | 3,417,815 | |
Other [Member] | ||
Operating leases: | ||
Right of use asset | 314,433 | |
Current operating lease liabilities | 81,213 | |
Noncurrent operating lease liabilities | 265,954 | |
Total operating lease liabilities | $ 347,167 |
Notes Payable and Lease Oblig_6
Notes Payable and Lease Obligations (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 430,359 | |
Operating cash flows from finance leases | 7,298 | |
Financing cash flows from finance leases | 6,634 | $ 8,699 |
Right of use assets obtained in exchange for lease liabilities: | ||
Operating leases | $ 3,513,347 |
Notes Payable and Lease Oblig_7
Notes Payable and Lease Obligations (Details 4) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Operating Leases | ||
2020 | $ 448,992 | |
2021 | 461,657 | |
2022 | 465,759 | |
2023 | 461,310 | |
2024 | 407,133 | |
Thereafter | 2,901,022 | |
Total lease payments | 5,145,873 | |
Less amount representing interest | (1,380,892) | |
Total lease obligations | 3,764,981 | |
Less current portion | (239,519) | |
Long-term lease obligations | 3,525,462 | |
Finance Leases | ||
2020 | 13,597 | |
2021 | 12,355 | |
2022 | 10,051 | |
2023 | 4,514 | |
Total lease payments | 40,517 | |
Less amount representing interest | (10,795) | |
Total lease obligations | 29,722 | |
Less current portion | (8,317) | $ (11,309) |
Long-term lease obligations | $ 21,405 | $ 32,747 |
Notes Payable and Lease Oblig_8
Notes Payable and Lease Obligations (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | |
Lessee, operating lease, existence of option to extend | true | ||
Lessee, operating lease, option to extend | P5Y | ||
Operating lease cost | $ 469,231 | ||
Rent expense | $ 614,300 | $ 548,300 | |
The Move, LLC [Member] | CEO and President [Member] | |||
Ownership Interest | 24.30% | ||
Corporate Headquarters [Member] | |||
Operating lease cost | $ 339,500 | ||
Minimum [Member] | |||
Leases Term | 1 year | ||
Maximum [Member] | |||
Leases Term | 15 years | ||
Revolving Line of Credit [Member] | |||
Line of credit amount | $ 75,080 | ||
Line of credit maturity date | Apr. 12, 2020 | ||
Effective interest rate | 6.25% | 7.00% | |
Revolving Line of Credit [Member] | Prime Rate [Member] | |||
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 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Current income tax expense: | ||
Federal | $ 438,528 | $ 334,526 |
State | 81,681 | 70,783 |
Total current income tax expense | 520,209 | 405,309 |
Deferred income tax benefit: | ||
Federal | (51,419) | (82,241) |
State | (8,790) | (14,060) |
Total deferred income tax benefit | (60,209) | (96,301) |
Total income tax expense | $ 460,000 | $ 309,008 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Expected tax expense | $ 320,808 | $ 196,428 |
State tax provision, net | 54,843 | 41,227 |
Permanent differences | 11,030 | 6,765 |
Minority interest | 75,785 | 30,924 |
Other, net | (2,466) | 33,664 |
Total income tax expense | $ 460,000 | $ 309,008 |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets (liabilities): | ||
Accruals, stock-based compensation and other | $ 181,062 | $ 162,430 |
Property and equipment | (14,654) | (67,676) |
Intangibles assets | 211,520 | 81,169 |
Net deferred tax assets | $ 377,928 | $ 175,923 |
Stock Buyback Plan (Details)
Stock Buyback Plan (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number of Shares | ||
Number of shares, beginning | 504,859 | 319,789 |
Number of shares purchased | 319,863 | 185,070 |
Number of shares, ending | 824,722 | 504,859 |
Cost of Shares | ||
Cost of shares, beginning | $ 1,109,061 | $ 724,530 |
Cost of shares purchased | 555,429 | 384,531 |
Cost of shares, ending | $ 1,664,490 | $ 1,109,061 |
Average Cost per Share | ||
Average cost per share, beginning | $ 2.20 | $ 2.27 |
Average cost per share purchased | 1.74 | 2.08 |
Average cost per share, ending | $ 2.02 | $ 2.20 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 162,405 | $ 161,128 |
Stock Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | 146,731 | 94,751 |
Restricted Stock Awards [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 15,674 | $ 66,377 |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) | Dec. 31, 2019USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | $ 187,996 |
Unvested restricted stock awards | 4,957 |
Total unrecognized compensation expense | 192,953 |
2020 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 113,378 |
Unvested restricted stock awards | 4,251 |
Total unrecognized compensation expense | 117,629 |
2021 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 70,896 |
Unvested restricted stock awards | 706 |
Total unrecognized compensation expense | 71,602 |
2022 [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unvested stock options | 3,722 |
Total unrecognized compensation expense | $ 3,722 |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details 2) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Number of options awarded to purchase common shares | 10,000 | 183,750 |
Risk-free interest rate | 1.50% | |
Risk-free interest rate, minimum | 2.60% | |
Risk-free interest rate, maximum | 3.00% | |
Expected volatility | 100.30% | |
Expected volatility, minimum | 115.90% | |
Expected volatility, maximum | 154.30% | |
Expected life of options from the date of grant | 9 years 9 months 18 days | 9 years 9 months 18 days |
Stock-Based Compensation (Det_4
Stock-Based Compensation (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number of awards | ||
Balance, beginning | 434,451 | 266,585 |
Granted | 10,000 | 183,750 |
Expired/Forfeited | (7,325) | (15,884) |
Balance, ending | 437,126 | 434,451 |
Weighted avg. exercise price per share | ||
Balance, beginning | $ 1.49 | $ 1.23 |
Granted | 1.71 | 1.91 |
Expired/Forfeited | 1.86 | 1.85 |
Balance, ending | 1.46 | 1.49 |
Weighted avg. grant date fair value per share | ||
Balance, beginning | 1.47 | 1.22 |
Granted | 1.53 | 1.85 |
Expired/Forfeited | 1.83 | 1.83 |
Balance, ending | $ 1.49 | $ 1.47 |
Weighted avg. remaining contractual life (in years) | ||
Balance, beginning | 6 years 10 months 28 days | 6 years 22 days |
Granted | 9 years 9 months 18 days | 9 years 8 months 5 days |
Expired/Forfeited | 7 years 6 months 18 days | 7 years 10 months 10 days |
Balance, ending | 5 years 11 months 19 days | 6 years 10 months 28 days |
Aggregate intrinsic value | ||
Balance, beginning | $ 230,039 | $ 462,508 |
Balance, ending | 150,417 | $ 230,039 |
Exercisable, ending | 310,728 | |
Unvested, ending | $ 126,398 |
Stock-Based Compensation (Det_5
Stock-Based Compensation (Details 4) - Restricted Stock Awards [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Restricted Stock | ||
Balance, beginning | 30,000 | 99,000 |
Granted | 5,000 | |
Vested | (25,000) | (74,000) |
Balance, ending | 5,000 | 30,000 |
Weighted Average Exercise Price | ||
Balance, beginning | $ 2.38 | $ 2.56 |
Granted | 2.55 | |
Vested | 2.35 | 2.63 |
Balance, ending | $ 2.55 | $ 2.38 |
Stock-Based Compensation (Det_6
Stock-Based Compensation (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Numbers of options forfeited | 7,325 | 15,884 |
Number of unvested options forfeited | 3,365 | 8,318 |
Restricted Stock Awards [Member] | Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 1 year | |
Restricted Stock Awards [Member] | Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 3 years | |
2006 Equity Incentive Plan (the "2006 Plan") [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares authorized for issuance under incentive plan | 3,000,000 | |
Shares outstanding | 168,751 | |
2016 Equity Incentive Plan (the "2016 Plan") [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares authorized for issuance under incentive plan | 5,000,000 | |
Shares outstanding | 4,712,375 |
Basic and Diluted Net Income _3
Basic and Diluted Net Income per Share (Details) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Basic: | ||
Weighted average shares outstanding | 24,850,409 | 24,825,933 |
Diluted: | ||
Weighted average shares outstanding | 24,850,409 | 24,825,933 |
Weighted average effects of dilutive securities | 176,838 | 163,524 |
Total | 25,027,247 | 24,989,457 |
Antidilutive securities: | 283,459 | 270,700 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue from related parties | $ 5,000 | $ 7,900 |
Related party rent expense | $ 464,500 | $ 490,600 |
The Move, LLC [Member] | CEO and President [Member] | ||
Ownership Interest | 24.30% |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Noncontrolling Interest [Abstract] | ||
Redeemable noncontrolling interest, beginning | $ 1,449,007 | $ 1,574,765 |
Net loss attributable to non-controlling interest | (322,195) | (125,758) |
Cash paid | (1,000,000) | |
Fair market value of stock | (547,112) | |
Adjustment to additional paid-in capital | $ 420,300 | |
Redeemable noncontrolling interest, ending | $ 1,449,007 |
Commitments and Contingencies_3
Commitments and Contingencies (Details Narrative) | Dec. 17, 2019USD ($)$ / sharesshares | Aug. 30, 2018USD ($)shares | Jan. 12, 2018USD ($)ft² | Dec. 28, 2016USD ($)shares | Nov. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2019USD ($)ft² | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) |
Lease incentives | $ 362,088 | ||||||||
Plan contribution | $ 168,700 | 174,700 | |||||||
Rental payments | $ 430,359 | ||||||||
Value of shares issued upon acquisition | 433,131 | ||||||||
The Move, LLC [Member] | CEO and President [Member] | |||||||||
Ownership Interest | 24.30% | ||||||||
San Ramon [Member] | |||||||||
Monthly rental rate | $ 5,900 | ||||||||
Lease expiration date | May 1, 2024 | ||||||||
SureHarvest Services LLC [Member] | |||||||||
Percentage of business acquired | 40.00% | 60.00% | |||||||
Total consideration for acquisition | $ 2,660,000 | ||||||||
Cash payments for acquisition | $ 1,000,000 | $ 1,122,000 | |||||||
Number of shares issued upon acquisition, shares | shares | 303,951 | 850,852 | |||||||
Value of shares issued upon acquisition | $ 547,000 | $ 1,534,900 | |||||||
Share price (in dollars per share) | $ / shares | $ 1.80 | ||||||||
Percentage of remaining ownership interest | 40.00% | ||||||||
SureHarvest Services LLC [Member] | Soquel [Member] | |||||||||
Monthly rental rate | $ 2,700 | ||||||||
Lease expiration date | Feb. 28, 2019 | ||||||||
SureHarvest Services LLC [Member] | Modesto [Member] | |||||||||
Monthly rental rate | $ 600 | ||||||||
JVF Consulting LLC [Member] | |||||||||
Total consideration for acquisition | $ 815,290 | ||||||||
Cash payments for acquisition | $ 500,000 | ||||||||
Number of shares issued upon acquisition, shares | shares | 158,437 | ||||||||
Value of shares issued upon acquisition | $ 315,300 | ||||||||
JVF Consulting LLC [Member] | Pleasanton [Member] | |||||||||
Monthly rental rate | $ 2,200 | ||||||||
Urbandale, Lowa Office [Member] | |||||||||
Term of the operating lease | 2 years | ||||||||
Extended term of operating lease | 3 years | ||||||||
Monthly rental rate | $ 3,000 | ||||||||
Lease expiration date | Aug. 31, 2022 | ||||||||
North Dakota Office [Member] | |||||||||
Term of the operating lease | 5 years | ||||||||
Monthly rental rate | $ 150 | ||||||||
Area of real property | ft² | 2,300 | ||||||||
Lease expiration date | Mar. 1, 2018 | ||||||||
Purchase price | $ 135,600 | ||||||||
Castle Rock New Lease [Member] | |||||||||
Monthly rental rate | $ 39,400 | ||||||||
Area of building leased | ft² | 15,700 | ||||||||
Castle Rock Lease [Member] | |||||||||
Lease incentives | $ 163,000 | ||||||||
Leasehold improvements | $ 425,000 | ||||||||
First Amendment Castle Rock New Lease [Member] | |||||||||
Lease incentives | 230,200 | ||||||||
Additional lease improvement | $ 370,500 |
Supplemental Cash Flow Inform_3
Supplemental Cash Flow Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash paid during the year: | ||
Interest expense | $ 10,057 | $ 4,837 |
Income taxes | 343,818 | 759,300 |
Non-cash investing and financing activities: | ||
Common stock issued in connection with acquisition of non-controlling interest in SureHarvest Services, LLC | $ 547,112 | |
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 | |
Lease incentive obligation | $ 230,220 |
Segments (Details)
Segments (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Assets: | |||
Intangible and other assets, net | $ 3,247,695 | $ 3,852,121 | |
Goodwill | 2,945,734 | 3,143,734 | $ 2,652,250 |
Total assets | 18,237,461 | 14,463,938 | |
Revenues: | |||
Total revenues | 20,774,416 | 17,803,559 | |
Costs of revenues: | |||
Total costs of revenues | 11,695,001 | 10,059,808 | |
Gross profit | 9,079,415 | 7,743,751 | |
Depreciation & amortization | 1,096,460 | 942,418 | |
Other operating expenses | 6,430,584 | 5,926,780 | |
Segment operating income (loss) | 1,552,371 | 874,553 | |
Other items to reconcile segment operating income (loss) to net income attributable to WFCF: | |||
Other expense (income) | 69,401 | (109,433) | |
Income tax (benefit)/expense | 460,000 | 309,008 | |
Net loss attributable to non-controlling interest | 322,195 | 125,758 | |
Net (loss)/income attributable to WFCF | 1,345,165 | 800,736 | |
Verification and Certification Service Revenue [Member] | |||
Revenues: | |||
Total revenues | 15,564,411 | 13,743,311 | |
Costs of revenues: | |||
Total costs of revenues | 8,444,309 | 7,564,946 | |
Product Sales [Member] | |||
Revenues: | |||
Total revenues | 3,300,799 | 2,266,771 | |
Costs of revenues: | |||
Total costs of revenues | 2,148,564 | 1,438,648 | |
Software License, Maintenance and Support Services Revenue [Member] | |||
Revenues: | |||
Total revenues | 1,066,543 | 993,161 | |
Costs of revenues: | |||
Total costs of revenues | 615,248 | 644,746 | |
Software-Related Consulting Service Revenue [Member] | |||
Revenues: | |||
Total revenues | 842,663 | 800,316 | |
Costs of revenues: | |||
Total costs of revenues | 486,880 | 411,468 | |
Verification and Certification Segment [Member] | |||
Assets: | |||
Goodwill | 1,133,122 | 1,133,122 | 1,279,762 |
Software Sales and Related Consulting Segment [Member] | |||
Assets: | |||
Goodwill | 1,812,612 | 2,010,612 | $ 1,372,488 |
Operating Segments [Member] | Verification and Certification Segment [Member] | |||
Assets: | |||
Intangible and other assets, net | 1,303,795 | 1,464,435 | |
Goodwill | 1,133,122 | 1,133,122 | |
Total assets | 13,236,311 | 9,178,009 | |
Revenues: | |||
Total revenues | 18,865,210 | 16,010,082 | |
Costs of revenues: | |||
Total costs of revenues | 10,776,856 | 9,003,594 | |
Gross profit | 8,088,354 | 7,006,488 | |
Depreciation & amortization | 373,583 | 320,094 | |
Other operating expenses | 5,624,489 | 5,245,707 | |
Segment operating income (loss) | 2,090,282 | 1,440,687 | |
Other items to reconcile segment operating income (loss) to net income attributable to WFCF: | |||
Other expense (income) | (92,584) | ||
Net (loss)/income attributable to WFCF | 2,182,866 | 1,440,687 | |
Operating Segments [Member] | Verification and Certification Segment [Member] | Verification and Certification Service Revenue [Member] | |||
Revenues: | |||
Total revenues | 15,564,411 | 13,743,311 | |
Costs of revenues: | |||
Total costs of revenues | 8,628,292 | 7,564,946 | |
Operating Segments [Member] | Verification and Certification Segment [Member] | Product Sales [Member] | |||
Revenues: | |||
Total revenues | 3,300,799 | 2,266,771 | |
Costs of revenues: | |||
Total costs of revenues | 2,148,564 | 1,438,648 | |
Operating Segments [Member] | Software Sales and Related Consulting Segment [Member] | |||
Assets: | |||
Intangible and other assets, net | 1,943,900 | 2,387,686 | |
Goodwill | 1,812,613 | 2,010,612 | |
Total assets | 5,001,150 | 5,285,929 | |
Revenues: | |||
Total revenues | 2,221,344 | 1,793,477 | |
Costs of revenues: | |||
Total costs of revenues | 1,102,128 | 1,056,214 | |
Gross profit | 1,119,216 | 737,263 | |
Depreciation & amortization | 722,877 | 622,324 | |
Other operating expenses | 934,250 | 681,073 | |
Segment operating income (loss) | (537,911) | (566,134) | |
Other items to reconcile segment operating income (loss) to net income attributable to WFCF: | |||
Other expense (income) | 161,985 | ||
Net loss attributable to non-controlling interest | 322,195 | 125,758 | |
Net (loss)/income attributable to WFCF | (377,701) | (440,376) | |
Operating Segments [Member] | Software Sales and Related Consulting Segment [Member] | Software License, Maintenance and Support Services Revenue [Member] | |||
Revenues: | |||
Total revenues | 1,273,820 | 993,161 | |
Costs of revenues: | |||
Total costs of revenues | 615,248 | 644,746 | |
Operating Segments [Member] | Software Sales and Related Consulting Segment [Member] | Software-Related Consulting Service Revenue [Member] | |||
Revenues: | |||
Total revenues | 947,524 | 800,316 | |
Costs of revenues: | |||
Total costs of revenues | 486,880 | 411,468 | |
Eliminations and Other [Member] | |||
Revenues: | |||
Total revenues | (312,138) | ||
Costs of revenues: | |||
Total costs of revenues | (183,983) | ||
Gross profit | (128,155) | ||
Other operating expenses | (128,155) | ||
Other items to reconcile segment operating income (loss) to net income attributable to WFCF: | |||
Other expense (income) | (109,433) | ||
Income tax (benefit)/expense | 460,000 | 309,008 | |
Net (loss)/income attributable to WFCF | (460,000) | $ (199,575) | |
Eliminations and Other [Member] | Verification and Certification Service Revenue [Member] | |||
Costs of revenues: | |||
Total costs of revenues | (183,983) | ||
Eliminations and Other [Member] | Software License, Maintenance and Support Services Revenue [Member] | |||
Revenues: | |||
Total revenues | (207,277) | ||
Eliminations and Other [Member] | Software-Related Consulting Service Revenue [Member] | |||
Revenues: | |||
Total revenues | $ (104,861) |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | Feb. 21, 2020USD ($) |
Subsequent Event [Member] | Postelsia Holdings, Ltd. [Member] | |
Cash payments for acquisition | $ 300,000 |