UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the Quarterly period ended September 30, 2020
   
[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from ____________ to _____________

 

Commission File No. 333-133624

 

WHERE FOOD COMES FROM, INC.

(exact name of registrant as specified in its charter)

 

Colorado   43-1802805

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

202 6th Street, Suite 400

Castle Rock, CO 80104

(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code:

(303) 895-3002

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer” and “accelerated filer” and “smaller reporting entity” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer: [  ] Accelerated filer: [  ]
Non-accelerated filer: [  ] Smaller reporting company: [X]
Emerging growth company [  ]    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value   WFCF   OTC Markets Group

 

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of October 30, 2020, was 24,685,704.

 

 

 

 

 

 

Where Food Comes From, Inc.

Table of Contents

September 30, 2020

 

Part 1 - Financial Information  
     
Item 1. Financial Statements 3
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21
     
Item 4. Controls and Procedures 27
     
Part II - Other Information  
     
Item 1. Legal Proceedings 28
     
Item 1A. Risk Factors 28
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
     
Item 6. Exhibits 28

 

2
 

 

Part 1 - Financial Information

 

Item 1. Financial Statements

 

Where Food Comes From, Inc.

Consolidated Balance Sheets

 

   September 30,   December 31, 
(Amounts in thousands, except per share amounts)  2020   2019 
  (Unaudited)     
Assets        
Current assets:          
Cash and cash equivalents  $4,625   $2,638 
Accounts receivable, net of allowance   2,523    2,515 
Short-term investments in certificates of deposit   262    258 
Prepaid expenses and other current assets   717    450 
Total current assets   8,127    5,861 
Property and equipment, net   1,669    1,545 
Operating lease right-of-use assets   3,073    3,268 
Investment in Progressive Beef   991    991 
Intangible and other assets, net   3,105    3,248 
Goodwill   2,946    2,946 
Deferred tax assets, net   350    378 
Total assets  $20,261   $18,237 
           
Liabilities and Equity          
Current liabilities:          
Accounts payable  $953   $1,023 
Accrued expenses and other current liabilities   1,179    674 
Deferred revenue   1,148    797 
Current portion of long term debt   641    - 
Current portion of finance lease obligations   9    8 
Current portion of operating lease obligations   260    239 
Total current liabilities   4,190    2,741 
Long term debt, net of current portion   391    - 
Finance lease obligations, net of current portion   14    21 
Operating lease obligation, net of current portion   3,328    3,526 
Total liabilities   7,923    6,288 
           
Commitments and contingencies          
           
Equity:          
Preferred stock, $0.001 par value; 5,000 shares authorized; none issued or outstanding   -    - 
Common stock, $0.001 par value; 95,000 shares authorized; 25,812 (2020) and 25,802 (2019) shares issued, and 24,677 (2020) and 24,977 (2019) shares outstanding   26    26 
Additional paid-in-capital   11,508    11,425 
Treasury stock of 1,135 (2020) and 825 (2019) shares   (2,199)   (1,665)
Retained earnings   3,003    2,163 
Total equity   12,338    11,949 
Total liabilities and stockholders’ equity  $20,261   $18,237 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3
 

 

Where Food Comes From, Inc.

Consolidated Statements of Operations

(Unaudited)

 

   Three months ended September 30, 
(Amounts in thousands, except per share amounts)  2020   2019 
Revenues:        
Verification and certification service revenue  $4,307   $4,759 
Product sales   1,362    1,086 
Software license, maintenance and support services revenue   245    227 
Software-related consulting service revenue   283    160 
Total revenues   6,197    6,232 
Costs of revenues:          
Costs of verification and certification services   2,233    2,673 
Costs of products   866    697 
Costs of software license, maintenance and support services   138    153 
Costs of software-related consulting services   198    122 
Total costs of revenues   3,435    3,645 
Gross profit   2,762    2,587 
Selling, general and administrative expenses   1,806    1,973 
Income from operations   956    614 
Other expense (income):          
Dividend income from Progressive Beef   (30)   (30)
Other income, net   (2)   (2)
Gain on sale of assets   (19)   - 
Loss on foreign currency exchange   2    - 
Interest expense   4    2 
Income before income taxes   1,001    644 
Income tax expense   271    184 
Net income   730    460 
Net loss attributable to non-controlling interest   -    81 
Net income attributable to Where Food Comes From, Inc.  $730   $541 
           
Per share - net income attributable to Where Food Comes From, Inc.:          
Basic  $0.03   $0.02 
Diluted  $0.03   $0.02 
           
Weighted average number of common shares outstanding:          
Basic   24,745    24,792 
Diluted   24,894    24,972 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4
 

 

Where Food Comes From, Inc.

Consolidated Statements of Operations

(Unaudited)

 

   Nine months ended September 30, 
(Amounts in thousands, except per share amounts)  2020   2019 
Revenues:        
Verification and certification service revenue  $10,218   $11,314 
Product sales   2,883    2,363 
Software license, maintenance and support services revenue   625    822 
Software-related consulting service revenue   799    576 
Total revenues   14,525    15,075 
Costs of revenues:          
Costs of verification and certification services   5,283    6,332 
Costs of products   1,869    1,538 
Costs of software license, maintenance and support services   393    469 
Costs of software-related consulting services   508    395 
Total costs of revenues   8,053    8,734 
Gross profit   6,472    6,341 
Selling, general and administrative expenses   5,401    5,624 
Income from operations   1,071    717 
Other expense (income):          
Dividend income from Progressive Beef   (90)   (90)
Other income, net   (6)   (7)
Gain on foreign currency exchange   1    - 
Gain on sale of assets   (19)   (1)
Interest expense   9    8 
Income before income taxes   1,176    807 
Income tax expense   336    230 
Net income   840    577 
Net loss attributable to non-controlling interest   -    182 
Net income attributable to Where Food Comes From, Inc.  $840   $759 
           
Per share - net income attributable to Where Food Comes From, Inc.:          
Basic  $0.03   $0.03 
Diluted  $0.03   $0.03 
           
Weighted average number of common shares outstanding:          
Basic   24,857    24,879 
Diluted   25,011    25,062 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5
 

 

Where Food Comes From, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

   Nine months ended September 30, 
(Amounts in thousands)  2020   2019 
         
Operating activities:          
Net income  $840   $577 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   736    802 
Gain on sale of assets   (19)   (1)
Stock-based compensation expense   80    129 
Deferred tax benefit   28    (73)
Bad debt expense   49    27 
Changes in operating assets and liabilities, net of effect from acquisitions:          
Accounts receivable   (57)   (794)
Short-term investments   (4)   (11)
Prepaid expenses and other assets   (267)   233 
Accounts payable   (70)   481 
Accrued expenses and other current liabilities   505    641 
Deferred revenue   351    297 
Right of use assets and liabilities, net   4    27 
Net cash provided by operating activities   2,176    2,335 
           
Investing activities:          
Acquisition of Postelsia Holdings, Ltd.   (300)   - 
Proceeds from sale of assets   34    1 
Purchases of property, equipment and software development costs   (416)   (268)
Proceeds from maturity of short-term investments   -    253 
Net cash used in by investing activities   (682)   (14)
           
Financing activities:          
Repayments of notes payable   -    (7)
Proceeds from long term debt   1,030    - 
Repayments of finance lease obligations   (6)   (5)
Proceeds from stock option exercise   3    - 
Stock repurchase under Stock Buyback Plan   (534)   (371)
Net provided by (cash used) in financing activities   493    (383)
Net change in cash   1,987    1,938 
Cash at beginning of period   2,638    1,482 
Cash at end of period  $4,625   $3,420 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6
 

 

Where Food Comes From, Inc.

Consolidated Statement of Equity

(Unaudited)

 

           Additional             
   Common Stock   Paid-in   Treasury   Retained     
(Amounts in thousands)  Shares   Amount   Capital   Stock   Earnings   Total 
                         
Balance at January 1, 2019   24,968   $25   $11,031   $(1,109)  $818   $10,765 
Stock-based compensation expense   -    -    45    -    -    45 
Repurchase of common shares under Stock Buyback Plan   (47)   -    -    (83)   -    (83)
Net income attributable to Where Food Comes From, Inc.   -    -    -    -    (143)   (143)
Balance at March 31, 2019   24,921   $    25   $11,076   $(1,192)  $675   $10,584 
                               
Stock-based compensation expense   -    -    47    -    -    47 
Repurchase of common shares under Stock Buyback Plan   (95)   -    -    (169)   -    (169)
Net income attributable to Where Food Comes From, Inc.   -    -    -    -    361    361 
Balance at June 30, 2019   24,826   $25   $11,123   $(1,361)  $1,036   $10,823 
                               
Stock-based compensation expense   -    -    37    -    -    37 
Vesting of restricted shares to Employees   25    -    -              - 
Repurchase of common shares under Stock Buyback Plan   (67)   -    -    (119)   -    (119)
Net income attributable to Where Food Comes From, Inc.   -    -    -    -    541    541 
Balance at September 30, 2019   24,784   $25   $11,160   $(1,480)  $1,577   $11,282 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7
 

 

Where Food Comes From, Inc.

Consolidated Statement of Equity

(Unaudited)

 

           Additional             
   Common Stock   Paid-in   Treasury   Retained     
(Amounts in thousands)  Shares   Amount   Capital   Stock   Earnings   Total 
                         
Balance at December 31, 2019   24,977   $    26   $11,425   $(1,665)  $2,163   $11,949 
                               
Stock-based compensation expense   -    -    31    -    -    31 
Repurchase of common shares under Stock Buyback Plan   (84)   -    -    (158)   -    (158)
Net loss attributable to Where Food Comes From, Inc.   -    -    -    -    (241)   (241)
Balance at March 31, 2020   24,893   $26   $11,456   $(1,823)  $1,922   $11,581 
                               
Stock-based compensation expense   -    -    24    -    -    24 
Stock options exercised   10    -    3    -    -    3 
Repurchase of common shares under Stock Buyback Plan   (64)   -    -    (111)   -    (111)
Net income attributable to Where Food Comes From, Inc.   -    -    -    -    351    351 
Balance at June 30, 2020   24,839   $26   $11,483   $(1,934)  $2,273   $11,848 
                               
Stock-based compensation expense   -    -    25    -    -    25 
Repurchase of common shares under Stock Buyback Plan   (162)   -    -    (265)   -    (265)
Net income attributable to Where Food Comes From, Inc.   -    -    -    -    730    730 
Balance at September 30, 2020   24,677   $26   $11,508   $(2,199)  $3,003   $12,338 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

8
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Note 1 - The Company and Basis of Presentation

 

Business Overview

 

Where Food Comes From, Inc. is a Colorado corporation based in Castle Rock, Colorado (“WFCF”, the “Company,” “our,” “we,” or “us”). We are an independent, third-party food verification company conducting both on-site and desk audits to verify that claims being made about livestock, food, other high-value specialty crops and agricultural products are accurate. We care about food and other agricultural products, how it is grown and raised, the quality of what we eat, what farmers and ranchers do, and authentically telling that story to the consumer. Our team visits farms and ranches and looks at their plants, animals, and records, and compares the information we collect to specific standards or claims that farms and ranches want to make about how they are producing food. We strive to ensure that everyone involved in the food business - from growers and farmers to retailers and shoppers – can count on WFCF to provide authentic and transparent information about the food we eat and how, where, and by whom it is produced.

 

We also provide sustainability programs, compliance management and farming information management solutions to drive sustainable value creation. We employ a software-as-a-service (“SaaS”) revenue model that bundles annual software licenses with ongoing software enhancements and upgrades and a wide range of professional services that generate incremental revenue specific to the food and agricultural industry. Finally, the Company’s Where Food Comes From Source Verified® retail and restaurant labeling program utilizes the verification of product attributes to connect consumers directly to the source of the food they purchase through product labeling and web-based information sharing and education.

 

Most of our customers are located throughout the United States.

 

Basis of Presentation

 

Our unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the results of operations, financial position and cash flows of Where Food Comes From, Inc. and its subsidiaries, International Certification Services, Inc. (“ICS”), Validus Verification Services, LLC (“Validus”), Sterling Solutions (“Sterling”), SureHarvest Services, LLC. (“SureHarvest”), A Bee Organic, Sow Organic, JVF Consulting and Postelsia Holdings, Ltd. (“Postelsia”) (collectively referred to as “we,” “us,” and “our” throughout this Form 10-Q). 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. 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. Actual results could differ from the estimates.

 

The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements and footnotes thereto for the year ended December 31, 2019, included in our Form 10-K filed on March 5, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. Certain prior year amounts have been reclassified to conform to current year presentation. Net income and shareholders’ equity were not affected by these reclassifications. The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations. The consolidated operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for any other interim period of any future year.

 

9
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Seasonality

 

Our business is subject to seasonal fluctuations. Significant portions of our verification and certification service revenue are typically realized during late May through early October when the calf marketings and the growing seasons are at their peak. Because of the seasonality of the business and our industry, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

 

Recent Accounting Pronouncements

 

The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

 

Recently Adopted Accounting Pronouncements

 

On January 1, 2020 we adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. The adoption of this update did not have a material impact on our Consolidated Financial Statements.

 

On January 1, 2020 we adopted 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 adoption of this update did not have a material impact on our Consolidated Financial Statements.

 

On January 1, 2020 we adopted 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 adoption of this update did not have a material impact on our Consolidated Financial Statements.

 

Note 2 – Business Acquisitions

 

On February 21, 2020 the Company acquired all of the stock of privately held Postelsia Holdings, Ltd. (“Postelsia”) for $250,000 in cash at the acquisition closing date, with an additional $50,000 in cash being held in escrow and paid in September 2020. The escrowed funds were to support any claims by the Company for breaches of representation and warranties, of which there were none.

 

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 operates as a wholly owned subsidiary of the Company.

 

We believe the total consideration paid approximates the fair value of the assets acquired. We have allocated the total consideration to our identifiable intangible assets (customer relationships) to be amortized over an estimated useful life of 8 years.

 

10
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Note 3 – Basic and Diluted Net Income per Share

 

Basic net income per share was computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and restricted stock awards are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

 

The following is a reconciliation of the share data used in the basic and diluted income per share computations (amounts in thousands):

 

  

Three months ended

September 30,

  

Nine months ended

September 30,

 
   2020   2019   2020   2019 
Basic:                
Weighted average shares outstanding   24,745    24,792    24,857    24,879 
                     
Diluted:                    
Weighted average shares outstanding   24,745    24,792    24,857    24,879 
Weighted average effects of dilutive securities   149    180    154    183 
Total   24,894    24,972    25,011    25,062 
                     
Antidilutive securities:   286    283    286    283 

 

Note 4 - Investment in Progressive Beef, LLC

 

For the three months ended September 30, 2020 and September 30, 2019, the Company received dividend income from Progressive Beef of $30,000 representing a distribution of their earnings. For the nine months ended September 30, 2020 and September 30, 2019, the Company received dividend income totaling $90,000, respectively. The income is reflected within the “other expense (income)” section of the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2020 and September 30, 2019. The Company completed a qualitative assessment and determined that there were no impairment indicators as of September 30, 2020.

 

11
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Note 5 – Intangible and Other Assets

 

The following table summarizes our intangible and other assets (amounts in thousands, except useful life):

 

   September 30,   December 31,   Estimated
   2020   2019   Useful Life
Intangible assets subject to amortization:             
Tradenames and trademarks  $417   $417   2.5 - 8.0 years
Accreditations   85    85   5.0 years
Customer relationships   3,664    3,351   3.0 - 15.0 years
Patents   970    970   4.0 years
Non-compete agreements   121    121   5.0 years
    5,257    4,944    
Less accumulated amortization   2,631    2,182    
    2,626    2,762    
Tradenames/trademarks (not subject to amortization)   465    465    
    3,091    3,227    
Other assets   14    21    
Intangible and other assets:  $3,105   $3,248    

 

Note 6 – Accrued Expenses and Other Current Liabilities

 

The following table summarizes our accrued expenses and other current liabilities as of (amounts in thousands):

 

   September 30,   December 31, 
   2020   2019 
         
Income and sales taxes payable  $483   $171 
Payroll related accruals   398    201 
Customer deposits   93    62 
Professional fees and other expenses   205    240 
   $1,179   $674 

 

Note 7 – Notes Payable

 

Unison Revolving Line of Credit

 

The Company has a revolving line of credit (“LOC”) agreement which matures April 12, 2022. 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 on maturity. As of September 30, 2020 and December 31, 2019, the effective interest rate was 4.75% and 6.25%, respectively. The LOC is collateralized by all the business assets of ICS. As of September 30, 2020, and December 31, 2019, there were no amounts outstanding under this LOC.

 

12
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Long Term Debt

 

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (“PPP”), the initiative provides federally guaranteed loans to small businesses. These loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. On April 17, 2020, the Company received a $1.0 million loan under the PPP with a maturity date of April 17, 2022 and an annual interest rate of 1.00%. The loan will be repaid in 17 monthly consecutive interest and principal payments of approximately $57,876, commencing December 1, 2020. See Note 15 for change in terms agreement effective October 6, 2020. While the Company believes a significant portion of the loan will be forgiven, the Company has not received any notification if any of the loan amount will be forgiven.

 

Note 8 – 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 operations.

 

The amount of stock-based compensation expense is as follows (amounts in thousands):

 

   Three months ended September 30,   Nine months ended September 30, 
   2020   2019   2020   2019 
Stock options  $24   $34   $77   $114 
Restricted stock awards   1    3    3    15 
Total  $25   $37   $80   $129 

 

During the three months ended September 30, 2019, the Company awarded stock options to purchase 10,000 shares of the Company’s common stock at an exercise price of $1.71 per share to the members on the Company’s Board of Directors. No other stock options were awarded during the nine months ended September 30, 2019.

 

During the three months ended September 30, 2020, the Company awarded stock options to purchase 8,000 shares of the Company’s common stock at an exercise price of $1.80 per shares to the members of the Company’s Board of Directors. During the nine months ended September 30, 2020, the Company awarded stock options to purchase 20,000 shares of the Company’s common stock at an exercise price of $2.05 per share to employees of the Company.

 

13
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions:

 

   Nine months ended September 30, 
   2020   2019 
Number of options awarded to purchase common shares   28,000    10,000 
Risk-free interest rate   1.19%   1.50%
Expected volatility   94.7%   100.30%
Assumed dividend yield   N/A    N/A 
Expected life of options from the date of grant   9.8 years    9.8 years 

 

The estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows (amounts in thousands):

 

Years ended December 31st:  Unvested stock options  

Unvested restricted

stock awards

  

Total unrecognized

compensation expense

 
2020 (remaining three months)  $      30   $      1   $       31 
2021   83    1    84 
2022   20    -    20 
2023   4    -    4 
   $137   $2   $139 

 

Equity Incentive Plans

 

Our 2016 Equity Incentive Plan (the “Equity Incentive Plan”) provides for the issuance of stock-based awards to employees, officers, directors and consultants. The Plan permits the granting of stock awards and stock options. The vesting of stock-based awards is generally subject to the passage of time and continued employment through the vesting period.

 

Stock Option Activity

 

Stock option activity under our Equity Incentive Plan is summarized as follows:

 

     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, December 31, 2019     437,126   $1.46   $1.49    5.97   $150,417 
Granted     28,000   $1.72   $1.98    9.57      
Exercised     (10,000)  $0.24   $0.24    0.50      
Expired/Forfeited     (25,325)  $-   $1.84    6.98      
Outstanding, September 30, 2020     429,801   $1.49   $1.53    5.51   $147,950 
Exercisable, September 30, 2020     315,686   $1.38   $1.40    4.44   $147,350 
Unvested, September 30, 2020     114,115   $1.77   $1.90    8.47   $600 

 

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on September 30, 2020 and the exercise price for the in-the-money options) that would have been received by the option holders if all the in-the-money options had been exercised on September 30, 2020.

 

14
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Restricted Stock Activity

 

Restricted stock activity under our Equity Incentive Plan is summarized as follows:

 

       Weighted avg. 
   Number of   grant date 
   options   fair value 
Non-vested restricted shares, December 31, 2019   5,000   $2.55 
Granted   -   $- 
Vested   -   $- 
Forfeited   -   $- 
Non-vested restricted shares, September 30, 2020   5,000   $2.55 

 

Note 9 – Income Taxes

 

Deferred tax assets and liabilities have been determined based upon the differences between the financial statement amounts and the tax bases of assets and liabilities as measured by enacted tax rates expected to be in effect when these differences are expected to reverse. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

The provision or benefit for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. For the three and nine months ended September 30, 2020 we recorded an income tax expense of approximately $271,000 and $336,000, respectively, compared to income tax expense of $184,000 and $230,000 for the same 2019 periods.

 

Note 10 - Revenue Recognition

 

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.

 

15
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Revenue attributable to each of our identified revenue categories is disaggregated in the table below (amounts in thousands).

 

   Three months ended September 30, 2020   Three months ended September 30, 2019 
   Verification
and
Certification
Segment
   Software
Sales and
Related
Consulting
Segment
   Eliminations
and Other
   Consolidated   Verification
and Certification
Segment
   Software
Sales and
Related
Consulting
Segment
   Eliminations
and Other
   Consolidated 
Verification and certification service revenue  $  4,307   $           -   $-   $     4,307   $4,759   $-   $          -   $4,759 
Product sales   1,362    -    -    1,362    1,086    -    -    1,086 
Software license, maintenance and support services revenue   -    245    -    245    -    287    (60)   227 
Software-related consulting service revenue   -    283    -    283    -    197    (37)   160 
Total revenues  $5,669   $528   $        -   $6,197   $5,845   $   484   $(97)  $       6,232 

 

   Nine months ended September 30, 2020   Nine months ended September 30, 2019 
   Verification
and
Certification
Segment
   Software
Sales and
Related
Consulting
Segment
   Eliminations
and Other
   Consolidated   Verification
and
Certification
Segment
   Software
Sales and
Related
Consulting
Segment
   Eliminations
and Other
   Consolidated 
Verification and certification service revenue  $10,218   $          -   $            -   $10,218   $11,314   $        -   $          -   $11,314 
Product sales   2,883    -    -    2,883    2,363    -    -    2,363 
Software license, maintenance and support services revenue   -    715    (90)   625    -    969    (147)   822 
Software-related consulting service revenue   -    823    (24)   799    -    661    (85)   576 
Total revenues  $13,101   $1,538   $(114)  $14,525   $13,677   $1,630   $(232)  $15,075 

 

Contract Balances

 

As of September 30, 2020, and December 31, 2019, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $2.5 million.

 

As of September 30, 2020, and December 31, 2019, deferred revenue from contracts with customers was approximately $1.1 and $0.8 million, respectively. The balance of the contract liabilities at September 30, 2020 and December 31, 2019 are expected to be recognized as revenue within one year or less of the invoice date.

 

The following table reflects the changes in our contract liabilities during the three month period ended September 30, 2020:

 

Deferred revenue (in thousands):    
Unearned revenue June 30, 2020  $1,206 
Unearned billings   671 
Revenue recognized   (729)
Unearned revenue September 30, 2020  $1,148 

 

The following table reflects the changes in our contract liabilities during the nine month period ended September 30, 2020:

 

Deferred revenue (in thousands):    
Unearned revenue January 1, 2020  $797 
Unearned billings   2,408 
Revenue recognized   (2,057)
Unearned revenue September 30, 2020  $1,148 

 

16
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 11 – Leases

 

The components of lease expense were as follows (amounts in thousands):

 

   Three months ended   Nine months ended 
  

September 30,

2020

  

September 30,

2019

  

September 30,

2020

  

September 30,

2019

 
Operating lease cost  $116   $115   $348   $353 
Finance lease cost                    
Amortization of assets   2    2    6    6 
Interest on finance lease obligations   1    2    4    6 
Variable lease cost   -    -    -    - 
Total net lease cost  $119   $119   $358   $365 

 

Included in the table above, for the three and nine months ended September 30, 2020, is $92,000 and $276,000, 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.

 

Supplemental balance sheet information related to leases was as follows (amounts in thousands):

 

   September 30, 2020   December 31, 2019 
Operating leases:  Related Party   Other   Total   Related Party   Other   Total 
Operating lease ROU assets  $2,800   $257   $3,057   $2,933   $314   $3,247 
                               
Current operating lease liabilities   174    86    260   $158   $81   $239 
Noncurrent operating lease liabilities   3,127    201    3,328    3,260    266    3,526 
Total operating lease liabilities  $3,301   $287   $3,588   $3,418   $347   $3,765 

 

Finance leases:  September 30, 2020   December 31, 2019 
Right of use asset, at cost  $43   $43 
Accumulated amortization   (27)   (22)
Right of use asset, net  $16   $21 
           
Current obligations of finance leases  $9   $8 
Finance leases, net of current obligations   14    21 
Total finance lease liabilities  $23   $29 
           
Weighted average remaining lease term (in years):          
Operating leases   10.2    11.0 
Finance leases   2.4    3.0 
           
Weighted average discount rate:          
Operating leases   5.8%   5.8%
Finance leases   20.9%   20.8%

 

Supplemental cash flow and other information related to leases was as follows (amounts in thousands):

 

   Three months ended   Nine months ended 
   September 30, 2020   September 30, 2019   September 30, 2020   September 30, 2019 
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flows from operating leases  $113   $109   $335   $320 
Operating cash flows from finance leases  $1   $2   $4   $6 
Financing cash flows from finance leases  $2   $2   $6   $5 
                     
ROU assets obtained in exchange for lease liabilities:                    
Operating leases  $3,507   $3,513   $3,507   $3,513 

 

17
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Maturities of lease liabilities were as follows (amounts in thousands):

 

Years Ending December 31st,  Operating Leases   Finance Leases 
2020 (remaining three months)  $114   $3 
2021   462    12 
2022   466    10 
2023   461    5 
2024   407    - 
Thereafter   2,901    - 
Total lease payments   4,811    30 
Less amount representing interest   (1,223)   (7)
Total lease obligations   3,588    23 
Less current portion   (260)   (9)
Long-term lease obligations  $3,328   $14 

 

Note 12 – Commitments and Contingencies

 

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.

 

Note 13 - 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, JVF Consulting, 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 Postelsia, 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.

 

18
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

The Company eliminates intercompany transfers between segments for management reporting purposes. The following table shows information for reportable operating segments (amounts in thousands):

 

   Three months ended September 30, 2020   Three months ended September 30, 2019 
   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  $7,079   $3,856   $(7,830)  $3,105   $1,344   $2,054   $-   $3,398 
Goodwill   2,946    -    -    2,946    1,133    2,011    -    3,144 
Total assets   19,494    5,379    (4,612)   20,261    14,214    5,324    -    19,538 
                                         
Revenues:                                        
Verification and certification service revenue  $4,307   $-   $-   $4,307   $4,759   $-   $-   $4,759 
Product sales   1,362    -    -    1,362    1,086    -    -    1,086 
Software license, maintenance and support services revenue   -    245    -    245    -    287    (60)   227 
Software-related consulting service revenue   -    283    -    283    -    197    (37)   160 
Total revenues  $5,669   $528   $-   $6,197   $5,845   $484   $(97)  $6,232 
Costs of revenues:                                        
Costs of verification and certification services  $2,233   $-   $-   $2,233   $2,733   $-   $(60)  $2,673 
Costs of products   866    -    -    866    697    -    -    697 
Costs of software license, maintenance and support services   -    138    -    138    -    153    -    153 
Costs of software-related consulting services   -    198    -    198    -    122    -    122 
Total costs of revenues   3,099    336    -    3,435    3,430    275    (60)   3,645 
Gross profit   2,570    192    -    2,762    2,415    209    (37)   2,587 
Depreciation & amortization   112    145    -    257    78    179    -    257 
Other operating expenses   1,404    145    -    1,549    1,520    233    (37)   1,716 
Segment operating (loss)/income  $1,054   $(98)  $-   $956   $817   $(203)  $-   $614 
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                        
Other expense (income)   (47)   2    -    (45)   (30)   -    -    (30)
Income tax expense   -    8    263    271    -    -    184    184 
Net loss attributable to non-controlling interest   -    -    -    -    -    81    -    81 
Net (loss)/income attributable to WFCF  $1,101   $(108)  $(263)  $730   $847   $(122)  $(184)  $541 

 

   Nine months ended September 30, 2020   Nine months ended September 30, 2019 
   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  $7,079   $3,856   $(7,830)  $3,105   $1,344   $2,054   $-   $3,398 
Goodwill   2,946    -    -    2,946    1,133    2,011    -    3,144 
Total assets   19,494    5,379    (4,612)   20,261    14,214    5,324    -    19,538 
                                         
Revenues:                                        
Verification and certification service revenue  $10,218   $-   $-   $10,218   $11,314   $-   $-   $11,314 
Product sales   2,883    -    -    2,883    2,362    -    -    2,362 
Software license, maintenance and support services revenue   -    715    (90)   625    -    969    (147)   822 
Software-related consulting service revenue   -    823    (24)   799    -    661    (85)   576 
Total revenues  $13,101   $1,538   $(114)  $14,525   $13,676   $1,630   $(232)  $15,074 
Costs of revenues:                                        
Costs of verification and certification services  $5,373   $-   $(90)  $5,283   $6,455   $-   $(123)  $6,332 
Costs of products   1,869    -    -    1,869    1,538    -    -    1,538 
Costs of software license, maintenance and support services   -    393    -    393    -    469    -    469 
Costs of software-related consulting services   -    508    -    508    -    395    -    395 
Total costs of revenues   7,242    901    (90)   8,053    7,993    864    (123)   8,734 
Gross profit   5,859    637    (24)   6,472    5,683    766    (109)   6,340 
Depreciation & amortization   313    423    -    736    263    539    -    802 
Other operating expenses   4,206    483    (24)   4,665    4,230    701    (109)   4,822 
Segment operating (loss)/income  $1,340   $(269)  $-   $1,071   $1,190   $(474)  $-   $716 
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                        
Other expense (income)   (107)   2    -    (105)   (90)   (1)   -    (91)
Income tax expense   -    8    328    336    -    -    230    230 
Net loss attributable to non-controlling interest   -    -    -    -    -    182    -    182 
Net (loss)/income attributable to WFCF  $1,447   $(279)  $(328)  $840   $1,280   $(291)  $(230)  $759 

 

19
 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

 

Note 14 – Supplemental Cash Flow Information

 

  

Nine months ended

September 30,

 
   2020   2019 
Cash paid during the year:          
Interest expense  $5   $8 
Income taxes  $362   $131 

 

Note 15 – Subsequent Events

 

On October 1, 2020 the Paycheck Protection Program (“PPP”) loan had a change in terms agreement modifying the beginning date of the principal and interest payments from December 1, 2020 to May 1, 2021. No other terms of the loan were modified, including the maturity date, interest rate or amount of the loan.

 

20
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

General

 

This information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Form 10−K for the fiscal year ended December 31, 2019. The following discussion and analysis includes historical and certain forward−looking information that should be read together with the accompanying consolidated financial statements, related footnotes and the discussion below of certain risks and uncertainties that could cause future operating results to differ materially from historical results or from the expected results indicated by forward−looking statements.

 

Business Overview

 

Where Food Comes From, Inc. and its subsidiaries (“WFCF,” the “Company,” “our,” “we,” or “us”) is a leading trusted resource for third-party verification of food production practices in North America. The Company supports more than 15,000 farmers, ranchers, vineyards, wineries, processors, retailers, distributors, trade associations, consumer brands and restaurants with a wide variety of value-added services provided through its family of verifiers, including IMI Global, International Certification Services, Validus Verification Services, Sterling Solutions, and A Bee Organic. In order to have credibility, product claims such as gluten-free, non-GMO, non-hormone treated, humane handling, and others require verification by an independent third-party such as WFCF. The Company’s principal business is conducting both on-site and desk audits to verify that claims being made about livestock, crops and other food products are accurate.

 

Through our more recent acquisitions, including SureHarvest Services LLC (“SureHarvest”); Sow Organic, LLC; and Postelsia Holdings, Ltd. (“Postelsia”) we 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. With the use of Quick Response Code (“QR”) technology, consumers can instantly access information about the producers behind their food.

 

WFCF was founded in 1996 and incorporated in the state of Colorado as a subchapter C corporation in 2006. The Company’s shares of common stock trade on the OTCQB marketplace under the stock ticker symbol, “WFCF.”

 

The Company’s original name – Integrated Management Information, Inc. (d.b.a. IMI Global) – was changed to Where Food Comes From, Inc. in 2012 to better reflect the Company’s mission. Early growth was attributable to source and age verification services for beef producers that wanted access to markets overseas following the discovery of “mad cow” disease in the U.S. Over the years, WFCF has expanded its portfolio to include verification and software services for most food groups and 40 standards. This growth has been achieved both organically and through the acquisition of other companies.

 

21
 

 

Coronavirus Pandemic (COVID-19)

 

In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic. The recent global outbreak of COVID-19 and the resulting government-mandated closures and social distancing measures have disrupted economic markets, potentially triggering a global recession. Continued closures and social distancing measures could have a detrimental effect in which the prolonged economic impact is uncertain. This could result in a variety of risks to our business including the inability to perform audits at our customers locations due to social distancing, supplier disruptions as a result of business closures, food systems that are in disarray resulting in global food shortages, euthanasia of animals and dumping of dairy products because farmers have no distribution channel, all of which could negatively influence our revenue and costs. The government may introduce healthcare reform measures for which we cannot predict the financial implication of on our business. A weak or declining economy could cause our customers to delay purchases or payments for our services and products. Additionally, COVID-19 may introduce additional challenges including our ability to produce sufficient cash flows from operations or to raise capital when needed at acceptable terms, if at all.

 

All of our locations have been affected. We have adjusted certain aspects of our operations to protect our employees while avoiding business interruption. As an essential business to the food and agriculture industries, we have maintained standard business operations while under stay at home (and similar) guidelines from various states, by allowing a majority of employees work remotely until government mandates allow for normal business operations. Employees essential to operations, management and the accounting function remain on-site at our corporate headquarters. Internal controls over financial reporting have not been impacted by employees working remotely. Management is continuously monitoring to ensure controls are effective and properly maintained.

 

The Company generally performs onsite audits in connection with its verification and certification activity. Due to safety and social distancing reasons, some customers have requested postponement of onsite visits. At this time, we are uncertain of the material impact that continued social distancing measures will have upon our business. We continue to work with standard setting bodies and identify innovative solutions to offer our customers. We believe that our transformative approach will help further differentiate us from competitors. Additionally, we believe third party verification is an essential component to the food and agricultural supply chain and ensures our future as a high quality provider of assurance services, thereby increasing the value of products in the food supply chain.

 

We will continue to monitor the situation closely and react accordingly to any future restrictions or limitations, while keeping the interest of our customers and business in mind. Due to the uncertainty in the severity and duration of the pandemic, the impact on our revenues, profitability and statement of financial position is uncertain at this time.

 

Seasonality

 

Our business is subject to seasonal fluctuations. Significant portions of our verification and certification service revenue are typically realized during late May through early October when the calf marketings and the growing seasons are at their peak. Because of the seasonality of the business and our industry, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

 

Liquidity and Capital Resources

 

At September 30, 2020, we had cash, cash equivalents and certificates of deposits (classified as short-term investments) of approximately $4.9 million compared to approximately $2.9 million at December 31, 2019. Our working capital at September 30, 2020 was approximately $3.9 million compared to $3.1 million at December 31, 2019.

 

Net cash provided by operating activities for the nine months ended September 30, 2020 was approximately $2.2 million compared to net cash provided of $2.3 million during the same period in 2019. Net cash provided by operating activities is driven by our net income and adjusted by non-cash items. Non-cash adjustments primarily include depreciation, amortization of intangible assets, stock-based compensation expense, and deferred taxes. The decrease in cash provided by operating activities was primarily driven by a change in accounts receivable, accounts payable and prepaid expenses and other assets as of September 30, 2020 compared to the same period in 2019. The Company has evaluated their customer receivables in relation to the current economic impact due to the coronavirus pandemic and does not feel any of the receivables are materially impaired at this time, but will keep actively monitoring the customer receivables.

 

Net cash used in investing activities for the nine months ended September 30, 2020, was approximately $0.7 million compared to cash used by investing activities of $14,000 in the 2019 period. Net cash used in the September 30, 2020 period was primarily attributable to acquisition of Postelsia Holdings, Ltd for $0.3 million and investment in software of $0.4 million.

 

22
 

 

Net cash provided by financing activities for the nine months ended September 30, 2020, was approximately $0.5 million compared to net cash used by financing activities of $0.4 million in the 2019 period. Net cash provided in the 2020 period was from $1.0 million in loan proceeds offset primarily by $0.5 million to repurchase common shares under the Stock Buyback Plan. Net cash used in the 2019 period was primarily due to the repurchase of common shares under the Stock Buyback Plan.

 

The primary driver of our operating cash flow is our third-party verification solutions, specifically the gross margin generated from services provided. Therefore, we focus on the elements of those operations, including revenue growth and long-term projects that ensure a steady stream of operating profits to enable us to meet our cash obligations. On a weekly basis, we review the performance of each of our revenue streams focusing on third-party verification solutions compared with prior periods and our operating plan. We believe that our various sources of capital, including cash flow from operating activities, and our ability to obtain additional financing, are adequate to finance current operations as well as the repayment of current debt obligations. We are actively monitoring the economic effect of the coronavirus pandemic on our liquidity. In the event a negative trend develops over the long term, we have several options available to us, including various forms of downsizing, company-wide pay decreases, as well as, other forms of financing and our internal cash-generating capabilities to adequately manage our ongoing business.

 

In keeping with our core business, we will continue to review our business model with a focus on profitability, long-term capital solutions and the potential impact of acquisitions or divestitures, if such an opportunity arises. Additionally, we continually evaluate all funding options, including additional offerings of our securities to private, public and institutional investors and other credit facilities as they become available.

 

Our plan for continued growth is primarily based upon continued expansion of verification bundling opportunities, as well as acquisitions in national and international markets. We believe that there are significant growth opportunities available to us because often the only way to differentiate a product or brand, or overcome import/export restrictions is via a quality verification program.

 

Debt Facility

 

The Company has a revolving line of credit (“LOC”) agreement which matures April 12, 2022. 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 September 30, 2020, and December 31, 2019, the effective interest rate was 4.75% and 6.25%, respectively. The LOC is collateralized by all the business assets of International Certification Services, Inc. (“ICS”). As of September 30, 2020, and December 31, 2019, there were no amounts outstanding under this LOC.

 

On April 17, 2020, the Company received a $1.0 million loan under the PPP with a maturity date of April 17, 2022 and an annual interest rate of 1.00%. The loan will be repaid in 17 monthly consecutive interest and principal payments of approximately $57,876, commencing December 1, 2020. See Note 15 for change in terms agreement effective October 6, 2020. The Company has not received any notification if any of the loan amount will be forgiven.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2020, we had no off-balance sheet arrangements of any type.

 

23
 

 

RESULTS OF OPERATIONS

 

Three and nine months ended September 30, 2020 compared to the same periods in fiscal year 2019

 

The following table shows information for reportable operating segments (amounts in thousands):

 

   Three months ended September 30, 2020   Three months ended September 30, 2019 
   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  $7,079   $3,856   $(7,830)  $3,105   $1,344   $2,054   $-   $3,398 
Goodwill   2,946    -    -    2,946    1,133    2,011    -    3,144 
Total assets   19,494    5,379    (4,612)   20,261    14,214    5,324    -    19,538 
                                         
Revenues:                                        
Verification and certification service revenue  $4,307   $-   $-   $4,307   $4,759   $-   $-   $4,759 
Product sales   1,362    -    -    1,362    1,086    -    -    1,086 
Software license, maintenance and support services revenue   -    245    -    245    -    287    (60)   227 
Software-related consulting service revenue   -    283    -    283    -    197    (37)   160 
Total revenues  $5,669   $528   $-   $6,197   $5,845   $484   $(97)  $6,232 
Costs of revenues:                                        
Costs of verification and certification services  $2,233   $-   $-   $2,233   $2,733   $-   $(60)  $2,673 
Costs of products   866    -    -    866    697    -    -    697 
Costs of software license, maintenance and support services   -    138    -    138    -    153    -    153 
Costs of software-related consulting services   -    198    -    198    -    122    -    122 
Total costs of revenues   3,099    336    -    3,435    3,430    275    (60)   3,645 
Gross profit   2,570    192    -    2,762    2,415    209    (37)   2,587 
Depreciation & amortization   112    145    -    257    78    179    -    257 
Other operating expenses   1,404    145    -    1,549    1,520    233    (37)   1,716 
Segment operating (loss)/income  $1,054   $(98)  $-   $956   $817   $(203)  $-   $614 
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                        
Other expense (income)   (47)   2    -    (45)   (30)   -    -    (30)
Income tax expense   -    8    263    271    -    -    184    184 
Net loss attributable to non-controlling interest   -    -    -    -    -    81    -    81 
Net (loss)/income attributable to WFCF  $1,101   $(108)  $(263)  $730   $847   $(122)  $(184)  $541 

 

   Nine months ended September 30, 2020   Nine months ended September 30, 2019 
   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  $7,079   $3,856   $(7,830)  $3,105   $1,344   $2,054   $-   $3,398 
Goodwill   2,946    -    -    2,946    1,133    2,011    -    3,144 
Total assets   19,494    5,379    (4,612)   20,261    14,214    5,324    -    19,538 
                                         
Revenues:                                        
Verification and certification service revenue  $10,218   $-   $-   $10,218   $11,314   $-   $-   $11,314 
Product sales   2,883    -    -    2,883    2,362    -    -    2,362 
Software license, maintenance and support services revenue   -    715    (90)   625    -    969    (147)   822 
Software-related consulting service revenue   -    823    (24)   799    -    661    (85)   576 
Total revenues  $13,101   $1,538   $(114)  $14,525   $13,676   $1,630   $(232)  $15,074 
Costs of revenues:                                        
Costs of verification and certification services  $5,373   $-   $(90)  $5,283   $6,455   $-   $(123)  $6,332 
Costs of products   1,869    -    -    1,869    1,538    -    -    1,538 
Costs of software license, maintenance and support services   -    393    -    393    -    469    -    469 
Costs of software-related consulting services   -    508    -    508    -    395    -    395 
Total costs of revenues   7,242    901    (90)   8,053    7,993    864    (123)   8,734 
Gross profit   5,859    637    (24)   6,472    5,683    766    (109)   6,340 
Depreciation & amortization   313    423    -    736    263    539    -    802 
Other operating expenses   4,206    483    (24)   4,665    4,230    701    (109)   4,822 
Segment operating (loss)/income  $1,340   $(269)  $-   $1,071   $1,190   $(474)  $-   $716 
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                        
Other expense (income)   (107)   2    -    (105)   (90)   (1)   -    (91)
Income tax expense   -    8    328    336    -    -    230    230 
Net loss attributable to non-controlling interest   -    -    -    -    -    182    -    182 
Net (loss)/income attributable to WFCF  $1,447   $(279)  $(328)  $840   $1,280   $(291)  $(230)  $759 

 

24
 

 

Verification and Certification Segment

 

Verification and certification service revenues consist of fees charged for verification audits and other verification and certification related services that the Company performs for customers. Fees earned from our WFCF labeling program are also included in our verification and certification revenues as it represents a value-added extension of our source verification. Verification and certification service revenue for the three and nine months ended September 30, 2020 decreased 9.5% and 9.7%, respectively, compared to 2019, primarily due to audit delays as a result of COVID-19.

 

Our product sales are an ancillary part of our verification and certification services and represent sales of cattle identification ear tags. Product sales for the three and nine months ended September 30, 2020 increased approximately $0.2 and $0.5 million, respectively, or 25.4% and 22.1%, respectively, compared to the same period in 2019. Overall, our product sales have increased primarily in response to the requirement for source and age verification using an identification tag at birth for cattle.

 

Costs of revenues for our verification and certification segment for the three and nine months ended September 30, 2020 were approximately $3.1 million and $7.2 million, respectively, compared to approximately $3.4 million and $8.0 million, respectively, for the same periods in 2019. Gross margin for the three and nine months ended September 30, 2020 increased to 45.3% and 44.7%, respectively, compared to 41.3% and 41.6%, respectively, in 2019 primarily due to shifting some verification activity to a desk audit performed by internal staff resulting from COVID-19 on farm biosecurity restrictions and due to introduction of our new CARE verification program. Our margins are generally impacted by various costs such as cost of products, salaries and benefits, insurance, and taxes.

 

Other operating expenses for the three and nine months ended September 30, 2020 decreased approximately 7.6% and 0.6%, respectively, compared to the same three and nine month periods in 2019. The decrease is predominately due to reduced travel, decrease in market spend and public company expenses.

 

Software Sales and Related Consulting Segment

 

Software license, maintenance and support services revenue is a revenue stream specific to our acquisitions of SureHarvest, Sow Organic, and Postelsia. We employ a 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. For the three and nine months ended September 30, 2020, software license, maintenance and support services revenue decreased approximately 14.6% and 26.2%, respectively, over the same 2019 periods, predominately due customer-related budget delays for significant software enhancements because of COVID-19 concerns which results in a decrease in the number of billable hours of staff focused on software enhancements and upgrades.

 

Software-related consulting service revenue primarily represents fees earned from professional consulting, customer education and training related services. Software-related consulting service revenue for the three and nine months ended September 30, 2020 increased approximately 43.7% and 24.5%, respectively, compared to the same periods in 2019. The three and nine month increases are due to fluctuations in customer demand for consulting services.

 

Costs of revenues for our software sales and related consulting segment for the three and nine months ended September 30, 2020 and September 30, 2019 was approximately $0.3 million and $0.9 million, respectively. Gross margin for the three and nine months ended September 30, 2020 declined to 36.4% and 41.4%, respectively, compared to 43.2% and 47.0%, respectively, for the same periods in 2019. The three and nine month decrease in gross margin is due to the decrease in billable hours of staff focused on software enhancements and upgrades.

 

Other operating expenses for the three and nine months ended September 30, 2020 decreased approximately 37.8% and 31.1%, respectively, compared to the same period in 2019. The decrease is predominately due to assets becoming fully depreciated in 2019, resulting in less depreciation and amortization in 2020.

 

25
 

 

As with all of our acquisitions, we continue to identify synergies and implement best practices. We focus our efforts to create value in various ways such as improving the performance of our acquired businesses, removing excess capacity, creating market access for products, acquiring skills and technologies more quickly or at a lower cost than we can build in-house, exploiting our industry-specific scalability and bundling opportunities, and picking winners early and helping them develop their businesses. Achieving any or all of these strategies take time to implement. We have learned that it can take two to three years after an acquisition to fully understand the complexities, at which time, we have seen solid improvements in revenues and/or costs.

 

Dividend Income from Progressive Beef

 

For the three and nine months ended September 30, 2020 and September 30, 2019, the Company received dividend income of $30,000 and $90,000, respectively, from Progressive Beef representing a distribution of their earnings.

 

Income Tax Expense

 

The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. For the three and nine months ended September 30, 2020, we recorded income tax expense of approximately $271,000 and $336,000, respectively, compared to income tax expense of $184,000 and $230,000 for the same periods in 2019.

 

Net Income and Per Share Information

 

As a result of the foregoing, net income attributable to WFCF shareholders for the three and nine months ended September 30, 2020 was approximately $0.7 million and $0.8 million, respectively, $0.03 per basic and diluted common share for both periods, compared to net income of approximately $0.5 million and $0.8 million, respectively, or $0.02 and $0.03 per basic and diluted common share, respectively, for the same periods in 2019.

 

26
 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our principal executive and financial officers, have conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. We believe that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can only provide reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

There have not been any other changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

27
 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in various legal actions, administrative proceedings and claims in the ordinary course of business. We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. We are not aware of any significant legal actions at this time.

 

ITEM 1A. RISK FACTORS

 

Our business is subject to a number of risks, including those identified in Item 1A. — “Risk Factors” of our 2019 Annual Report on Form 10−K, that could have a material effect on our business, results of operations, financial condition and/or liquidity and that could cause our operating results to vary significantly from period to period. As of September 30, 2020, the Company recognizes the coronavirus pandemic may have an economic impact on the Company, but management does not know and cannot estimate what the financial impact may be. We may also disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuer Purchases of Equity Securities

 

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 for the three months ended September 30, 2020 is as follows:

 

   Number of Shares   Cost of Shares   Average Cost per Share 
             
Shares purchased - July 2020   55,665   $85,778   $1.54 
Shares purchased - August 2020   74,742    119,840   $1.60 
Shares purchased - September 2020   31,112    59,699   $1.92 
Total   161,519   $265,317   $1.64 

 

ITEM 6. EXHIBITS

 

(a) Exhibits

 

  Number   Description
 

31.1

  Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2   Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32.1   Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
  32.2   Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

 

28
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: November 5, 2020 Where Food Comes From, Inc.
   
  By: /s/ John K. Saunders
  Chief Executive Officer
     
  By: /s/ Dannette Henning
  Chief Financial Officer

 

29

 

 

EXHIBIT 31.1

 

I, John Saunders, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Where Food Comes From, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 5, 2020  
   
/s/ John Saunders  
John Saunders, Chief Executive Officer  

 

 

 

 

EXHIBIT 31.2

 

I, Dannette Henning, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Where Food Comes From, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 5, 2020  
   
/s/ Dannette Henning  
Dannette Henning, Chief Financial Officer  

 

 

 

 

EXHIBIT 32.1

 

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

 

For purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, John Saunders the Chief Executive Officer of Where Food Comes From, Inc. (the “Company”), hereby certifies that, to his knowledge:

 

  (i) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 5, 2020  
   
/s/ John Saunders  
John Saunders, Chief Executive Officer  

 

 

 

 

EXHIBIT 32.2

 

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

 

For purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, Dannette Henning, the Chief Financial Officer of Where Food Comes From, Inc. (the “Company”), hereby certifies that, to her knowledge:

 

  (i) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 5, 2020  
   
/s/ Dannette Henning  
Dannette Henning, Chief Financial Officer  

 

 

 

v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Oct. 30, 2020
Cover [Abstract]    
Entity Registrant Name Where Food Comes From, Inc.  
Entity Central Index Key 0001360565  
Document Type 10-Q  
Document Period End Date Sep. 30, 2020  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity's Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   24,685,704
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2020  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 4,625 $ 2,638
Accounts receivable, net of allowance 2,523 2,515
Short-term investments in certificates of deposit 262 258
Prepaid expenses and other current assets 717 450
Total current assets 8,127 5,861
Property and equipment, net 1,669 1,545
Operating lease right-of-use assets 3,073 3,268
Investment in Progressive Beef 991 991
Intangible and other assets, net 3,105 3,248
Goodwill 2,946 2,946
Deferred tax assets, net 350 378
Total assets 20,261 18,237
Current liabilities:    
Accounts payable 953 1,023
Accrued expenses and other current liabilities 1,179 674
Deferred revenue 1,148 797
Current portion of long term debt 641
Current portion of finance lease obligations 9 8
Current portion of operating lease obligations 260 239
Total current liabilities 4,190 2,741
Long term debt, net of current portion 391
Finance lease obligations, net of current portion 14 21
Operating lease obligation, net of current portion 3,328 3,526
Total liabilities 7,923 6,288
Commitments and contingencies
Equity:    
Preferred stock, $0.001 par value; 5,000 shares authorized; none issued or outstanding
Common stock, $0.001 par value; 95,000 shares authorized; 25,812 (2020) and 25,802 (2019) shares issued, and 24,677 (2020) and 24,977 (2019) shares outstanding 26 26
Additional paid-in-capital 11,508 11,425
Treasury stock of 1,135 (2020) and 825 (2019) shares (2,199) (1,665)
Retained earnings 3,003 2,163
Total equity 12,338 11,949
Total liabilities and stockholders' equity $ 20,261 $ 18,237
v3.20.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, authorized 5,000,000 5,000,000
Preferred stock, issued
Preferred stock, outstanding
Common stock, par value $ 0.001 $ 0.001
Common stock, authorized 95,000,000 95,000,000
Common stock, issued 25,812,000 25,802,000
Common stock, outstanding 24,677,000 24,977,000
Treasury stock 1,135,000 825,000
v3.20.2
Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Revenues:        
Total revenues $ 6,197 $ 6,232 $ 14,525 $ 15,075
Costs of revenues:        
Total costs of revenues 3,435 3,645 8,053 8,734
Gross profit 2,762 2,587 6,472 6,341
Selling, general and administrative expenses 1,806 1,973 5,401 5,624
Income from operations 956 614 1,071 717
Other expense (income):        
Dividend income from Progressive Beef (30) (30) (90) (90)
Other income, net (2) (2) (6) (7)
Gain (loss) on foreign currency exchange 2 1
Gain on sale of assets (19) (19) (1)
Interest expense 4 2 9 8
Income before income taxes 1,001 644 1,176 807
Income tax expense 271 184 336 230
Net income 730 460 840 577
Net loss attributable to non-controlling interest 81 182
Net income attributable to Where Food Comes From, Inc. $ 730 $ 541 $ 840 $ 759
Per share - net income attributable to Where Food Comes From, Inc.:        
Basic $ 0.03 $ 0.02 $ 0.03 $ 0.03
Diluted $ 0.03 $ 0.02 $ 0.03 $ 0.03
Weighted average number of common shares outstanding:        
Basic 24,745,000 24,792,000 24,857,000 24,879,000
Diluted 24,894,000 24,972,000 25,011,000 25,062,000
Verification and Certification Service Revenue [Member]        
Revenues:        
Total revenues $ 4,307 $ 4,759 $ 10,218 $ 11,314
Costs of revenues:        
Total costs of revenues 2,233 2,673 5,283 6,332
Product Sales [Member]        
Revenues:        
Total revenues 1,362 1,086 2,883 2,363
Costs of revenues:        
Total costs of revenues 866 697 1,869 1,538
Software License, Maintenance and Support Services Revenue [Member]        
Revenues:        
Total revenues 245 227 625 822
Costs of revenues:        
Total costs of revenues 138 153 393 469
Software-Related Consulting Service Revenue [Member]        
Revenues:        
Total revenues 283 160 799 576
Costs of revenues:        
Total costs of revenues $ 198 $ 122 $ 508 $ 395
v3.20.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Operating activities:    
Net income $ 840 $ 577
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 736 802
Gain on sale of assets (19) (1)
Stock-based compensation expense 80 129
Deferred tax benefit 28 (73)
Bad debt expense 49 27
Changes in operating assets and liabilities, net of effect from acquisitions:    
Accounts receivable (57) (794)
Short-term investments (4) (11)
Prepaid expenses and other assets (267) 233
Accounts payable (70) 481
Accrued expenses and other current liabilities 505 641
Deferred revenue 351 297
Right of use assets and liabilities, net 4 27
Net cash provided by operating activities 2,176 2,335
Investing activities:    
Acquisition of Postelsia Holdings, Ltd. (300)
Proceeds from sale of assets 34 1
Purchases of property, equipment and software development costs (416) (268)
Proceeds from maturity of short-term investments 253
Net cash used in by investing activities (682) (14)
Financing activities:    
Repayments of notes payable (7)
Proceeds from long term debt 1,030
Repayments of finance lease obligations (6) (5)
Proceeds from stock option exercise 3
Stock repurchase under Stock Buyback Plan (534) (371)
Net provided by (cash used) in financing activities 493 (383)
Net change in cash 1,987 1,938
Cash at beginning of period 2,638 1,482
Cash at end of period $ 4,625 $ 3,420
v3.20.2
Consolidated Statement of Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Treasury Stock [Member]
Retained Earnings [Member]
Total
Balance at beginning at Dec. 31, 2018 $ 25 $ 11,031 $ (1,109) $ 818 $ 10,765
Balance at beginning, shares at Dec. 31, 2018 24,968        
Stock-based compensation expense 45 45
Repurchase of common shares under Stock Buyback Plan (83) (83)
Repurchase of common shares under Stock Buyback Plan, shares (47)        
Net income (loss) attributable to Where Food Comes From, Inc. (143) (143)
Balance at ending at Mar. 31, 2019 $ 25 11,076 (1,192) 675 10,584
Balance at ending, shares at Mar. 31, 2019 24,921        
Balance at beginning at Dec. 31, 2018 $ 25 11,031 (1,109) 818 10,765
Balance at beginning, shares at Dec. 31, 2018 24,968        
Net income (loss) attributable to Where Food Comes From, Inc.         759
Balance at ending at Sep. 30, 2019 $ 25 11,160 (1,480) 1,577 11,282
Balance at ending, shares at Sep. 30, 2019 24,784        
Balance at beginning at Mar. 31, 2019 $ 25 11,076 (1,192) 675 10,584
Balance at beginning, shares at Mar. 31, 2019 24,921        
Stock-based compensation expense 47 47
Repurchase of common shares under Stock Buyback Plan (169) (169)
Repurchase of common shares under Stock Buyback Plan, shares (95)        
Net income (loss) attributable to Where Food Comes From, Inc. 361 361
Balance at ending at Jun. 30, 2019 $ 25 11,123 (1,361) 1,036 10,823
Balance at ending, shares at Jun. 30, 2019 24,826        
Stock-based compensation expense 37 37
Vesting of restricted shares to Employees    
Vesting of restricted shares to Employees, shares 25        
Repurchase of common shares under Stock Buyback Plan (119)   (119)
Repurchase of common shares under Stock Buyback Plan, shares (67)        
Net income (loss) attributable to Where Food Comes From, Inc. 541 541
Balance at ending at Sep. 30, 2019 $ 25 11,160 (1,480) 1,577 11,282
Balance at ending, shares at Sep. 30, 2019 24,784        
Balance at beginning at Dec. 31, 2019 $ 26 11,425 (1,665) 2,163 11,949
Balance at beginning, shares at Dec. 31, 2019 24,977        
Stock-based compensation expense 31 31
Repurchase of common shares under Stock Buyback Plan (158) (158)
Repurchase of common shares under Stock Buyback Plan, shares (84)        
Net income (loss) attributable to Where Food Comes From, Inc. (241) (241)
Balance at ending at Mar. 31, 2020 $ 26 11,456 (1,823) 1,922 11,581
Balance at ending, shares at Mar. 31, 2020 24,893        
Balance at beginning at Dec. 31, 2019 $ 26 11,425 (1,665) 2,163 $ 11,949
Balance at beginning, shares at Dec. 31, 2019 24,977        
Stock options exercised, shares         10,000,000
Net income (loss) attributable to Where Food Comes From, Inc.         $ 840
Balance at ending at Sep. 30, 2020 $ 26 11,508 (2,199) 3,003 12,338
Balance at ending, shares at Sep. 30, 2020 24,677        
Balance at beginning at Mar. 31, 2020 $ 26 11,456 (1,823) 1,922 11,581
Balance at beginning, shares at Mar. 31, 2020 24,893        
Stock-based compensation expense   24     24
Stock options exercised 3 3
Stock options exercised, shares 10        
Repurchase of common shares under Stock Buyback Plan (111) (111)
Repurchase of common shares under Stock Buyback Plan, shares (64)        
Net income (loss) attributable to Where Food Comes From, Inc.       351 351
Balance at ending at Jun. 30, 2020 $ 26 11,483 (1,934) 2,273 11,848
Balance at ending, shares at Jun. 30, 2020 24,839        
Stock-based compensation expense 25 25
Repurchase of common shares under Stock Buyback Plan (265) (265)
Repurchase of common shares under Stock Buyback Plan, shares (162)        
Net income (loss) attributable to Where Food Comes From, Inc.       730 730
Balance at ending at Sep. 30, 2020 $ 26 $ 11,508 $ (2,199) $ 3,003 $ 12,338
Balance at ending, shares at Sep. 30, 2020 24,677        
v3.20.2
The Company and Basis of Presentation
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company and Basis of Presentation

Note 1 - The Company and Basis of Presentation

 

Business Overview

 

Where Food Comes From, Inc. is a Colorado corporation based in Castle Rock, Colorado (“WFCF”, the “Company,” “our,” “we,” or “us”). We are an independent, third-party food verification company conducting both on-site and desk audits to verify that claims being made about livestock, food, other high-value specialty crops and agricultural products are accurate. We care about food and other agricultural products, how it is grown and raised, the quality of what we eat, what farmers and ranchers do, and authentically telling that story to the consumer. Our team visits farms and ranches and looks at their plants, animals, and records, and compares the information we collect to specific standards or claims that farms and ranches want to make about how they are producing food. We strive to ensure that everyone involved in the food business - from growers and farmers to retailers and shoppers – can count on WFCF to provide authentic and transparent information about the food we eat and how, where, and by whom it is produced.

 

We also provide sustainability programs, compliance management and farming information management solutions to drive sustainable value creation. We employ a software-as-a-service (“SaaS”) revenue model that bundles annual software licenses with ongoing software enhancements and upgrades and a wide range of professional services that generate incremental revenue specific to the food and agricultural industry. Finally, the Company’s Where Food Comes From Source Verified® retail and restaurant labeling program utilizes the verification of product attributes to connect consumers directly to the source of the food they purchase through product labeling and web-based information sharing and education.

 

Most of our customers are located throughout the United States.

 

Basis of Presentation

 

Our unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the results of operations, financial position and cash flows of Where Food Comes From, Inc. and its subsidiaries, International Certification Services, Inc. (“ICS”), Validus Verification Services, LLC (“Validus”), Sterling Solutions (“Sterling”), SureHarvest Services, LLC. (“SureHarvest”), A Bee Organic, Sow Organic, JVF Consulting and Postelsia Holdings, Ltd. (“Postelsia”) (collectively referred to as “we,” “us,” and “our” throughout this Form 10-Q). 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. 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. Actual results could differ from the estimates.

 

The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements and footnotes thereto for the year ended December 31, 2019, included in our Form 10-K filed on March 5, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. Certain prior year amounts have been reclassified to conform to current year presentation. Net income and shareholders’ equity were not affected by these reclassifications. The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations. The consolidated operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for any other interim period of any future year.

 

Seasonality

 

Our business is subject to seasonal fluctuations. Significant portions of our verification and certification service revenue are typically realized during late May through early October when the calf marketings and the growing seasons are at their peak. Because of the seasonality of the business and our industry, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

 

Recent Accounting Pronouncements

 

The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

 

Recently Adopted Accounting Pronouncements

 

On January 1, 2020 we adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. The adoption of this update did not have a material impact on our Consolidated Financial Statements.

 

On January 1, 2020 we adopted 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 adoption of this update did not have a material impact on our Consolidated Financial Statements.

 

On January 1, 2020 we adopted 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 adoption of this update did not have a material impact on our Consolidated Financial Statements.

v3.20.2
Business Acquisitions
9 Months Ended
Sep. 30, 2020
Business Combinations [Abstract]  
Business Acquisitions

Note 2 – Business Acquisitions

 

On February 21, 2020 the Company acquired all of the stock of privately held Postelsia Holdings, Ltd. (“Postelsia”) for $250,000 in cash at the acquisition closing date, with an additional $50,000 in cash being held in escrow and paid in September 2020. The escrowed funds were to support any claims by the Company for breaches of representation and warranties, of which there were none.

 

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 operates as a wholly owned subsidiary of the Company.

 

We believe the total consideration paid approximates the fair value of the assets acquired. We have allocated the total consideration to our identifiable intangible assets (customer relationships) to be amortized over an estimated useful life of 8 years.

v3.20.2
Basic and Diluted Net Income Per Share
9 Months Ended
Sep. 30, 2020
Per share - net income attributable to Where Food Comes From, Inc.:  
Basic and Diluted Net Income Per Share

Note 3 – Basic and Diluted Net Income per Share

 

Basic net income per share was computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and restricted stock awards are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

 

The following is a reconciliation of the share data used in the basic and diluted income per share computations (amounts in thousands):

 

   

Three months ended

September 30,

   

Nine months ended

September 30,

 
    2020     2019     2020     2019  
Basic:                        
Weighted average shares outstanding     24,745       24,792       24,857       24,879  
                                 
Diluted:                                
Weighted average shares outstanding     24,745       24,792       24,857       24,879  
Weighted average effects of dilutive securities     149       180       154       183  
Total     24,894       24,972       25,011       25,062  
                                 
Antidilutive securities:     286       283       286       283  
v3.20.2
Investment in Progressive Beef, LLC
9 Months Ended
Sep. 30, 2020
Investments, All Other Investments [Abstract]  
Investment in Progressive Beef, LLC

Note 4 - Investment in Progressive Beef, LLC

 

For the three months ended September 30, 2020 and September 30, 2019, the Company received dividend income from Progressive Beef of $30,000 representing a distribution of their earnings. For the nine months ended September 30, 2020 and September 30, 2019, the Company received dividend income totaling $90,000, respectively. The income is reflected within the “other expense (income)” section of the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2020 and September 30, 2019. The Company completed a qualitative assessment and determined that there were no impairment indicators as of September 30, 2020.

v3.20.2
Intangible and Other Assets
9 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible and Other Assets

Note 5 – Intangible and Other Assets

 

The following table summarizes our intangible and other assets (amounts in thousands, except useful life):

 

    September 30,     December 31,     Estimated
    2020     2019     Useful Life
Intangible assets subject to amortization:                    
Tradenames and trademarks   $ 417     $ 417     2.5 - 8.0 years
Accreditations     85       85     5.0 years
Customer relationships     3,664       3,351     3.0 - 15.0 years
Patents     970       970     4.0 years
Non-compete agreements     121       121     5.0 years
      5,257       4,944      
Less accumulated amortization     2,631       2,182      
      2,626       2,762      
Tradenames/trademarks (not subject to amortization)     465       465      
      3,091       3,227      
Other assets     14       21      
Intangible and other assets:   $ 3,105     $ 3,248      
v3.20.2
Accrued Expenses and Other Current Liabilities
9 Months Ended
Sep. 30, 2020
Payables and Accruals [Abstract]  
Accrued Expenses and Other Current Liabilities

Note 6 – Accrued Expenses and Other Current Liabilities

 

The following table summarizes our accrued expenses and other current liabilities as of (amounts in thousands):

 

    September 30,     December 31,  
    2020     2019  
             
Income and sales taxes payable   $ 483     $ 171  
Payroll related accruals     398       201  
Customer deposits     93       62  
Professional fees and other expenses     205       240  
    $ 1,179     $ 674  
v3.20.2
Notes Payable
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Notes Payable

Note 7 – Notes Payable

 

Unison Revolving Line of Credit

 

The Company has a revolving line of credit (“LOC”) agreement which matures April 12, 2022. 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 on maturity. As of September 30, 2020 and December 31, 2019, the effective interest rate was 4.75% and 6.25%, respectively. The LOC is collateralized by all the business assets of ICS. As of September 30, 2020, and December 31, 2019, there were no amounts outstanding under this LOC.

 

Long Term Debt

 

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (“PPP”), the initiative provides federally guaranteed loans to small businesses. These loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. On April 17, 2020, the Company received a $1.0 million loan under the PPP with a maturity date of April 17, 2022 and an annual interest rate of 1.00%. The loan will be repaid in 17 monthly consecutive interest and principal payments of approximately $57,876, commencing December 1, 2020. See Note 15 for change in terms agreement effective October 6, 2020. While the Company believes a significant portion of the loan will be forgiven, the Company has not received any notification if any of the loan amount will be forgiven.

v3.20.2
Stock-Based Compensation
9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

Note 8 – 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 operations.

 

The amount of stock-based compensation expense is as follows (amounts in thousands):

 

    Three months ended September 30,     Nine months ended September 30,  
    2020     2019     2020     2019  
Stock options   $ 24     $ 34     $ 77     $ 114  
Restricted stock awards     1       3       3       15  
Total   $ 25     $ 37     $ 80     $ 129  

 

During the three months ended September 30, 2019, the Company awarded stock options to purchase 10,000 shares of the Company’s common stock at an exercise price of $1.71 per share to the members on the Company’s Board of Directors. No other stock options were awarded during the nine months ended September 30, 2019.

 

During the three months ended September 30, 2020, the Company awarded stock options to purchase 8,000 shares of the Company’s common stock at an exercise price of $1.80 per shares to the members of the Company’s Board of Directors. During the nine months ended September 30, 2020, the Company awarded stock options to purchase 20,000 shares of the Company’s common stock at an exercise price of $2.05 per share to employees of the Company.

 

The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions:

 

    Nine months ended September 30,  
    2020     2019  
Number of options awarded to purchase common shares     28,000       10,000  
Risk-free interest rate     1.19 %     1.50 %
Expected volatility     94.7 %     100.30 %
Assumed dividend yield     N/A       N/A  
Expected life of options from the date of grant     9.8 years       9.8 years  

 

The estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows (amounts in thousands):

 

Years ended December 31st:   Unvested stock options    

Unvested restricted

stock awards

   

Total unrecognized

compensation expense

 
2020 (remaining three months)   $       30     $       1     $        31  
2021     83       1       84  
2022     20       -       20  
2023     4       -       4  
    $ 137     $ 2     $ 139  

 

Equity Incentive Plans

 

Our 2016 Equity Incentive Plan (the “Equity Incentive Plan”) provides for the issuance of stock-based awards to employees, officers, directors and consultants. The Plan permits the granting of stock awards and stock options. The vesting of stock-based awards is generally subject to the passage of time and continued employment through the vesting period.

 

Stock Option Activity

 

Stock option activity under our Equity Incentive Plan is summarized as follows:

 

      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, December 31, 2019       437,126     $ 1.46     $ 1.49       5.97     $ 150,417  
Granted       28,000     $ 1.72     $ 1.98       9.57          
Exercised       (10,000 )   $ 0.24     $ 0.24       0.50          
Expired/Forfeited       (25,325 )   $ -     $ 1.84       6.98          
Outstanding, September 30, 2020       429,801     $ 1.49     $ 1.53       5.51     $ 147,950  
Exercisable, September 30, 2020       315,686     $ 1.38     $ 1.40       4.44     $ 147,350  
Unvested, September 30, 2020       114,115     $ 1.77     $ 1.90       8.47     $ 600  

 

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on September 30, 2020 and the exercise price for the in-the-money options) that would have been received by the option holders if all the in-the-money options had been exercised on September 30, 2020.

 

Restricted Stock Activity

 

Restricted stock activity under our Equity Incentive Plan is summarized as follows:

 

          Weighted avg.  
    Number of     grant date  
    options     fair value  
Non-vested restricted shares, December 31, 2019     5,000     $ 2.55  
Granted     -     $ -  
Vested     -     $ -  
Forfeited     -     $ -  
Non-vested restricted shares, September 30, 2020     5,000     $ 2.55  
v3.20.2
Income Taxes
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

Note 9 – Income Taxes

 

Deferred tax assets and liabilities have been determined based upon the differences between the financial statement amounts and the tax bases of assets and liabilities as measured by enacted tax rates expected to be in effect when these differences are expected to reverse. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

The provision or benefit for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. For the three and nine months ended September 30, 2020 we recorded an income tax expense of approximately $271,000 and $336,000, respectively, compared to income tax expense of $184,000 and $230,000 for the same 2019 periods.

v3.20.2
Revenue Recognition
9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition

Note 10 - Revenue Recognition

 

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 (amounts in thousands).

 

    Three months ended September 30, 2020     Three months ended September 30, 2019  
    Verification
and
Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated     Verification
and Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated  
Verification and certification service revenue   $   4,307     $            -     $ -     $      4,307     $ 4,759     $ -     $           -     $ 4,759  
Product sales     1,362       -       -       1,362       1,086       -       -       1,086  
Software license, maintenance and support services revenue     -       245       -       245       -       287       (60 )     227  
Software-related consulting service revenue     -       283       -       283       -       197       (37 )     160  
Total revenues   $ 5,669     $ 528     $         -     $ 6,197     $ 5,845     $    484     $ (97 )   $        6,232  

 

    Nine months ended September 30, 2020     Nine months ended September 30, 2019  
    Verification
and
Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated     Verification
and
Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated  
Verification and certification service revenue   $ 10,218     $           -     $             -     $ 10,218     $ 11,314     $         -     $           -     $ 11,314  
Product sales     2,883       -       -       2,883       2,363       -       -       2,363  
Software license, maintenance and support services revenue     -       715       (90 )     625       -       969       (147 )     822  
Software-related consulting service revenue     -       823       (24 )     799       -       661       (85 )     576  
Total revenues   $ 13,101     $ 1,538     $ (114 )   $ 14,525     $ 13,677     $ 1,630     $ (232 )   $ 15,075  

 

Contract Balances

 

As of September 30, 2020, and December 31, 2019, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $2.5 million.

 

As of September 30, 2020, and December 31, 2019, deferred revenue from contracts with customers was approximately $1.1 and $0.8 million, respectively. The balance of the contract liabilities at September 30, 2020 and December 31, 2019 are expected to be recognized as revenue within one year or less of the invoice date.

 

The following table reflects the changes in our contract liabilities during the three month period ended September 30, 2020:

 

Deferred revenue (in thousands):      
Unearned revenue June 30, 2020   $ 1,206  
Unearned billings     671  
Revenue recognized     (729 )
Unearned revenue September 30, 2020   $ 1,148  

 

The following table reflects the changes in our contract liabilities during the nine month period ended September 30, 2020:

 

Deferred revenue (in thousands):      
Unearned revenue January 1, 2020   $ 797  
Unearned billings     2,408  
Revenue recognized     (2,057 )
Unearned revenue September 30, 2020   $ 1,148  
v3.20.2
Leases
9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Leases

Note 11 – Leases

 

The components of lease expense were as follows (amounts in thousands):

 

    Three months ended     Nine months ended  
   

September 30,

2020

   

September 30,

2019

   

September 30,

2020

   

September 30,

2019

 
Operating lease cost   $ 116     $ 115     $ 348     $ 353  
Finance lease cost                                
Amortization of assets     2       2       6       6  
Interest on finance lease obligations     1       2       4       6  
Variable lease cost     -       -       -       -  
Total net lease cost   $ 119     $ 119     $ 358     $ 365  

 

Included in the table above, for the three and nine months ended September 30, 2020, is $92,000 and $276,000, 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.

 

Supplemental balance sheet information related to leases was as follows (amounts in thousands):

 

    September 30, 2020     December 31, 2019  
Operating leases:   Related Party     Other     Total     Related Party     Other     Total  
Operating lease ROU assets   $ 2,800     $ 257     $ 3,057     $ 2,933     $ 314     $ 3,247  
                                                 
Current operating lease liabilities     174       86       260     $ 158     $ 81     $ 239  
Noncurrent operating lease liabilities     3,127       201       3,328       3,260       266       3,526  
Total operating lease liabilities   $ 3,301     $ 287     $ 3,588     $ 3,418     $ 347     $ 3,765  

 

Finance leases:   September 30, 2020     December 31, 2019  
Right of use asset, at cost   $ 43     $ 43  
Accumulated amortization     (27 )     (22 )
Right of use asset, net   $ 16     $ 21  
                 
Current obligations of finance leases   $ 9     $ 8  
Finance leases, net of current obligations     14       21  
Total finance lease liabilities   $ 23     $ 29  
                 
Weighted average remaining lease term (in years):                
Operating leases     10.2       11.0  
Finance leases     2.4       3.0  
                 
Weighted average discount rate:                
Operating leases     5.8 %     5.8 %
Finance leases     20.9 %     20.8 %

 

Supplemental cash flow and other information related to leases was as follows (amounts in thousands):

 

    Three months ended     Nine months ended  
    September 30, 2020     September 30, 2019     September 30, 2020     September 30, 2019  
Cash paid for amounts included in the measurement of lease liabilities:                        
Operating cash flows from operating leases   $ 113     $ 109     $ 335     $ 320  
Operating cash flows from finance leases   $ 1     $ 2     $ 4     $ 6  
Financing cash flows from finance leases   $ 2     $ 2     $ 6     $ 5  
                                 
ROU assets obtained in exchange for lease liabilities:                                
Operating leases   $ 3,507     $ 3,513     $ 3,507     $ 3,513  

 

Maturities of lease liabilities were as follows (amounts in thousands):

 

Years Ending December 31st,   Operating Leases     Finance Leases  
2020 (remaining three months)   $ 114     $ 3  
2021     462       12  
2022     466       10  
2023     461       5  
2024     407       -  
Thereafter     2,901       -  
Total lease payments     4,811       30  
Less amount representing interest     (1,223 )     (7 )
Total lease obligations     3,588       23  
Less current portion     (260 )     (9 )
Long-term lease obligations   $ 3,328     $ 14  
v3.20.2
Commitments and Contingencies
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 12 – Commitments and Contingencies

 

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.

v3.20.2
Segments
9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segments

Note 13 - 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, JVF Consulting, 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 Postelsia, 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 (amounts in thousands):

 

    Three months ended September 30, 2020     Three months ended September 30, 2019  
    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   $ 7,079     $ 3,856     $ (7,830 )   $ 3,105     $ 1,344     $ 2,054     $ -     $ 3,398  
Goodwill     2,946       -       -       2,946       1,133       2,011       -       3,144  
Total assets     19,494       5,379       (4,612 )     20,261       14,214       5,324       -       19,538  
                                                                 
Revenues:                                                                
Verification and certification service revenue   $ 4,307     $ -     $ -     $ 4,307     $ 4,759     $ -     $ -     $ 4,759  
Product sales     1,362       -       -       1,362       1,086       -       -       1,086  
Software license, maintenance and support services revenue     -       245       -       245       -       287       (60 )     227  
Software-related consulting service revenue     -       283       -       283       -       197       (37 )     160  
Total revenues   $ 5,669     $ 528     $ -     $ 6,197     $ 5,845     $ 484     $ (97 )   $ 6,232  
Costs of revenues:                                                                
Costs of verification and certification services   $ 2,233     $ -     $ -     $ 2,233     $ 2,733     $ -     $ (60 )   $ 2,673  
Costs of products     866       -       -       866       697       -       -       697  
Costs of software license, maintenance and support services     -       138       -       138       -       153       -       153  
Costs of software-related consulting services     -       198       -       198       -       122       -       122  
Total costs of revenues     3,099       336       -       3,435       3,430       275       (60 )     3,645  
Gross profit     2,570       192       -       2,762       2,415       209       (37 )     2,587  
Depreciation & amortization     112       145       -       257       78       179       -       257  
Other operating expenses     1,404       145       -       1,549       1,520       233       (37 )     1,716  
Segment operating (loss)/income   $ 1,054     $ (98 )   $ -     $ 956     $ 817     $ (203 )   $ -     $ 614  
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                                                
Other expense (income)     (47 )     2       -       (45 )     (30 )     -       -       (30 )
Income tax expense     -       8       263       271       -       -       184       184  
Net loss attributable to non-controlling interest     -       -       -       -       -       81       -       81  
Net (loss)/income attributable to WFCF   $ 1,101     $ (108 )   $ (263 )   $ 730     $ 847     $ (122 )   $ (184 )   $ 541  

 

    Nine months ended September 30, 2020     Nine months ended September 30, 2019  
    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   $ 7,079     $ 3,856     $ (7,830 )   $ 3,105     $ 1,344     $ 2,054     $ -     $ 3,398  
Goodwill     2,946       -       -       2,946       1,133       2,011       -       3,144  
Total assets     19,494       5,379       (4,612 )     20,261       14,214       5,324       -       19,538  
                                                                 
Revenues:                                                                
Verification and certification service revenue   $ 10,218     $ -     $ -     $ 10,218     $ 11,314     $ -     $ -     $ 11,314  
Product sales     2,883       -       -       2,883       2,362       -       -       2,362  
Software license, maintenance and support services revenue     -       715       (90 )     625       -       969       (147 )     822  
Software-related consulting service revenue     -       823       (24 )     799       -       661       (85 )     576  
Total revenues   $ 13,101     $ 1,538     $ (114 )   $ 14,525     $ 13,676     $ 1,630     $ (232 )   $ 15,074  
Costs of revenues:                                                                
Costs of verification and certification services   $ 5,373     $ -     $ (90 )   $ 5,283     $ 6,455     $ -     $ (123 )   $ 6,332  
Costs of products     1,869       -       -       1,869       1,538       -       -       1,538  
Costs of software license, maintenance and support services     -       393       -       393       -       469       -       469  
Costs of software-related consulting services     -       508       -       508       -       395       -       395  
Total costs of revenues     7,242       901       (90 )     8,053       7,993       864       (123 )     8,734  
Gross profit     5,859       637       (24 )     6,472       5,683       766       (109 )     6,340  
Depreciation & amortization     313       423       -       736       263       539       -       802  
Other operating expenses     4,206       483       (24 )     4,665       4,230       701       (109 )     4,822  
Segment operating (loss)/income   $ 1,340     $ (269 )   $ -     $ 1,071     $ 1,190     $ (474 )   $ -     $ 716  
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                                                
Other expense (income)     (107 )     2       -       (105 )     (90 )     (1 )     -       (91 )
Income tax expense     -       8       328       336       -       -       230       230  
Net loss attributable to non-controlling interest     -       -       -       -       -       182       -       182  
Net (loss)/income attributable to WFCF   $ 1,447     $ (279 )   $ (328 )   $ 840     $ 1,280     $ (291 )   $ (230 )   $ 759  
v3.20.2
Supplemental Cash Flow Information
9 Months Ended
Sep. 30, 2020
Supplemental Cash Flow Information [Abstract]  
Supplemental Cash Flow Information

Note 14 – Supplemental Cash Flow Information

 

   

Nine months ended

September 30,

 
    2020     2019  
Cash paid during the year:                
Interest expense   $ 5     $ 8  
Income taxes   $ 362     $ 131  
v3.20.2
Subsequent Events
9 Months Ended
Sep. 30, 2020
Subsequent Events [Abstract]  
Subsequent Events

Note 15 – Subsequent Events

 

On October 1, 2020 the Paycheck Protection Program (“PPP”) loan had a change in terms agreement modifying the beginning date of the principal and interest payments from December 1, 2020 to May 1, 2021. No other terms of the loan were modified, including the maturity date, interest rate or amount of the loan.

v3.20.2
Basic and Diluted Net Income Per Share (Tables)
9 Months Ended
Sep. 30, 2020
Per share - net income attributable to Where Food Comes From, Inc.:  
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 (amounts in thousands):

 

   

Three months ended

September 30,

   

Nine months ended

September 30,

 
    2020     2019     2020     2019  
Basic:                        
Weighted average shares outstanding     24,745       24,792       24,857       24,879  
                                 
Diluted:                                
Weighted average shares outstanding     24,745       24,792       24,857       24,879  
Weighted average effects of dilutive securities     149       180       154       183  
Total     24,894       24,972       25,011       25,062  
                                 
Antidilutive securities:     286       283       286       283  
v3.20.2
Intangible and Other Assets (Tables)
9 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Intangible and Other Assets

The following table summarizes our intangible and other assets (amounts in thousands, except useful life):

 

    September 30,     December 31,     Estimated
    2020     2019     Useful Life
Intangible assets subject to amortization:                    
Tradenames and trademarks   $ 417     $ 417     2.5 - 8.0 years
Accreditations     85       85     5.0 years
Customer relationships     3,664       3,351     3.0 - 15.0 years
Patents     970       970     4.0 years
Non-compete agreements     121       121     5.0 years
      5,257       4,944      
Less accumulated amortization     2,631       2,182      
      2,626       2,762      
Tradenames/trademarks (not subject to amortization)     465       465      
      3,091       3,227      
Other assets     14       21      
Intangible and other assets:   $ 3,105     $ 3,248      
v3.20.2
Accrued Expenses and Other Current Liabilities (Tables)
9 Months Ended
Sep. 30, 2020
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 (amounts in thousands):

 

    September 30,     December 31,  
    2020     2019  
             
Income and sales taxes payable   $ 483     $ 171  
Payroll related accruals     398       201  
Customer deposits     93       62  
Professional fees and other expenses     205       240  
    $ 1,179     $ 674  
v3.20.2
Stock-Based Compensation (Tables)
9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
Schedule of Stock-based Compensation Expense

The amount of stock-based compensation expense is as follows (amounts in thousands):

 

    Three months ended September 30,     Nine months ended September 30,  
    2020     2019     2020     2019  
Stock options   $ 24     $ 34     $ 77     $ 114  
Restricted stock awards     1       3       3       15  
Total   $ 25     $ 37     $ 80     $ 129  
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:

 

    Nine months ended September 30,  
    2020     2019  
Number of options awarded to purchase common shares     28,000       10,000  
Risk-free interest rate     1.19 %     1.50 %
Expected volatility     94.7 %     100.30 %
Assumed dividend yield     N/A       N/A  
Expected life of options from the date of grant     9.8 years       9.8 years  
Schedule of Unrecognized Compensation Cost from Unvested Awards

The estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows (amounts in thousands):

 

Years ended December 31st:   Unvested stock options    

Unvested restricted

stock awards

   

Total unrecognized

compensation expense

 
2020 (remaining three months)   $       30     $       1     $        31  
2021     83       1       84  
2022     20       -       20  
2023     4       -       4  
    $ 137     $ 2     $ 139  
Schedule of Stock Option Activity

Stock option activity under our Equity Incentive Plan 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, December 31, 2019       437,126     $ 1.46     $ 1.49       5.97     $ 150,417  
Granted       28,000     $ 1.72     $ 1.98       9.57          
Exercised       (10,000 )   $ 0.24     $ 0.24       0.50          
Expired/Forfeited       (25,325 )   $ -     $ 1.84       6.98          
Outstanding, September 30, 2020       429,801     $ 1.49     $ 1.53       5.51     $ 147,950  
Exercisable, September 30, 2020       315,686     $ 1.38     $ 1.40       4.44     $ 147,350  
Unvested, September 30, 2020       114,115     $ 1.77     $ 1.90       8.47     $ 600  
Schedule of Restricted Stock Activity Under Equity Incentive Plan

Restricted stock activity under our Equity Incentive Plan is summarized as follows:

 

          Weighted avg.  
    Number of     grant date  
    options     fair value  
Non-vested restricted shares, December 31, 2019     5,000     $ 2.55  
Granted     -     $ -  
Vested     -     $ -  
Forfeited     -     $ -  
Non-vested restricted shares, September 30, 2020     5,000     $ 2.55  
v3.20.2
Revenue Recognition (Tables)
9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Schedule of Revenues Disaggregated by Revenue

Revenue attributable to each of our identified revenue categories is disaggregated in the table below (amounts in thousands).

 

    Three months ended September 30, 2020     Three months ended September 30, 2019  
    Verification
and
Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated     Verification
and Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated  
Verification and certification service revenue   $   4,307     $            -     $ -     $      4,307     $ 4,759     $ -     $           -     $ 4,759  
Product sales     1,362       -       -       1,362       1,086       -       -       1,086  
Software license, maintenance and support services revenue     -       245       -       245       -       287       (60 )     227  
Software-related consulting service revenue     -       283       -       283       -       197       (37 )     160  
Total revenues   $ 5,669     $ 528     $         -     $ 6,197     $ 5,845     $    484     $ (97 )   $        6,232  

 

    Nine months ended September 30, 2020     Nine months ended September 30, 2019  
    Verification
and
Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated     Verification
and
Certification
Segment
    Software
Sales and
Related
Consulting
Segment
    Eliminations
and Other
    Consolidated  
Verification and certification service revenue   $ 10,218     $           -     $             -     $ 10,218     $ 11,314     $         -     $           -     $ 11,314  
Product sales     2,883       -       -       2,883       2,363       -       -       2,363  
Software license, maintenance and support services revenue     -       715       (90 )     625       -       969       (147 )     822  
Software-related consulting service revenue     -       823       (24 )     799       -       661       (85 )     576  
Total revenues   $ 13,101     $ 1,538     $ (114 )   $ 14,525     $ 13,677     $ 1,630     $ (232 )   $ 15,075  
Schedule of Changes in Contract Liabilities

The following table reflects the changes in our contract liabilities during the three month period ended September 30, 2020:

 

Deferred revenue (in thousands):      
Unearned revenue June 30, 2020   $ 1,206  
Unearned billings     671  
Revenue recognized     (729 )
Unearned revenue September 30, 2020   $ 1,148  

 

The following table reflects the changes in our contract liabilities during the nine month period ended September 30, 2020:

 

Deferred revenue (in thousands):      
Unearned revenue January 1, 2020   $ 797  
Unearned billings     2,408  
Revenue recognized     (2,057 )
Unearned revenue September 30, 2020   $ 1,148  
v3.20.2
Leases (Tables)
9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Schedule of Lease Expense

The components of lease expense were as follows (amounts in thousands):

 

    Three months ended     Nine months ended  
   

September 30,

2020

   

September 30,

2019

   

September 30,

2020

   

September 30,

2019

 
Operating lease cost   $ 116     $ 115     $ 348     $ 353  
Finance lease cost                                
Amortization of assets     2       2       6       6  
Interest on finance lease obligations     1       2       4       6  
Variable lease cost     -       -       -       -  
Total net lease cost   $ 119     $ 119     $ 358     $ 365  
Schedule of Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases was as follows (amounts in thousands):

 

    September 30, 2020     December 31, 2019  
Operating leases:   Related Party     Other     Total     Related Party     Other     Total  
Operating lease ROU assets   $ 2,800     $ 257     $ 3,057     $ 2,933     $ 314     $ 3,247  
                                                 
Current operating lease liabilities     174       86       260     $ 158     $ 81     $ 239  
Noncurrent operating lease liabilities     3,127       201       3,328       3,260       266       3,526  
Total operating lease liabilities   $ 3,301     $ 287     $ 3,588     $ 3,418     $ 347     $ 3,765  

 

Finance leases:   September 30, 2020     December 31, 2019  
Right of use asset, at cost   $ 43     $ 43  
Accumulated amortization     (27 )     (22 )
Right of use asset, net   $ 16     $ 21  
                 
Current obligations of finance leases   $ 9     $ 8  
Finance leases, net of current obligations     14       21  
Total finance lease liabilities   $ 23     $ 29  
                 
Weighted average remaining lease term (in years):                
Operating leases     10.2       11.0  
Finance leases     2.4       3.0  
                 
Weighted average discount rate:                
Operating leases     5.8 %     5.8 %
Finance leases     20.9 %     20.8 %
Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow and other information related to leases was as follows (amounts in thousands):

 

    Three months ended     Nine months ended  
    September 30, 2020     September 30, 2019     September 30, 2020     September 30, 2019  
Cash paid for amounts included in the measurement of lease liabilities:                        
Operating cash flows from operating leases   $ 113     $ 109     $ 335     $ 320  
Operating cash flows from finance leases   $ 1     $ 2     $ 4     $ 6  
Financing cash flows from finance leases   $ 2     $ 2     $ 6     $ 5  
                                 
ROU assets obtained in exchange for lease liabilities:                                
Operating leases   $ 3,507     $ 3,513     $ 3,507     $ 3,513  
Schedule of Maturities of Operating Lease and Finance Lease Liabilities

Maturities of lease liabilities were as follows (amounts in thousands):

 

Years Ending December 31st,   Operating Leases     Finance Leases  
2020 (remaining three months)   $ 114     $ 3  
2021     462       12  
2022     466       10  
2023     461       5  
2024     407       -  
Thereafter     2,901       -  
Total lease payments     4,811       30  
Less amount representing interest     (1,223 )     (7 )
Total lease obligations     3,588       23  
Less current portion     (260 )     (9 )
Long-term lease obligations   $ 3,328     $ 14  
v3.20.2
Segments (Tables)
9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Schedule of Operating Segments

The Company eliminates intercompany transfers between segments for management reporting purposes. The following table shows information for reportable operating segments (amounts in thousands):

 

    Three months ended September 30, 2020     Three months ended September 30, 2019  
    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   $ 7,079     $ 3,856     $ (7,830 )   $ 3,105     $ 1,344     $ 2,054     $ -     $ 3,398  
Goodwill     2,946       -       -       2,946       1,133       2,011       -       3,144  
Total assets     19,494       5,379       (4,612 )     20,261       14,214       5,324       -       19,538  
                                                                 
Revenues:                                                                
Verification and certification service revenue   $ 4,307     $ -     $ -     $ 4,307     $ 4,759     $ -     $ -     $ 4,759  
Product sales     1,362       -       -       1,362       1,086       -       -       1,086  
Software license, maintenance and support services revenue     -       245       -       245       -       287       (60 )     227  
Software-related consulting service revenue     -       283       -       283       -       197       (37 )     160  
Total revenues   $ 5,669     $ 528     $ -     $ 6,197     $ 5,845     $ 484     $ (97 )   $ 6,232  
Costs of revenues:                                                                
Costs of verification and certification services   $ 2,233     $ -     $ -     $ 2,233     $ 2,733     $ -     $ (60 )   $ 2,673  
Costs of products     866       -       -       866       697       -       -       697  
Costs of software license, maintenance and support services     -       138       -       138       -       153       -       153  
Costs of software-related consulting services     -       198       -       198       -       122       -       122  
Total costs of revenues     3,099       336       -       3,435       3,430       275       (60 )     3,645  
Gross profit     2,570       192       -       2,762       2,415       209       (37 )     2,587  
Depreciation & amortization     112       145       -       257       78       179       -       257  
Other operating expenses     1,404       145       -       1,549       1,520       233       (37 )     1,716  
Segment operating (loss)/income   $ 1,054     $ (98 )   $ -     $ 956     $ 817     $ (203 )   $ -     $ 614  
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                                                
Other expense (income)     (47 )     2       -       (45 )     (30 )     -       -       (30 )
Income tax expense     -       8       263       271       -       -       184       184  
Net loss attributable to non-controlling interest     -       -       -       -       -       81       -       81  
Net (loss)/income attributable to WFCF   $ 1,101     $ (108 )   $ (263 )   $ 730     $ 847     $ (122 )   $ (184 )   $ 541  

 

    Nine months ended September 30, 2020     Nine months ended September 30, 2019  
    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   $ 7,079     $ 3,856     $ (7,830 )   $ 3,105     $ 1,344     $ 2,054     $ -     $ 3,398  
Goodwill     2,946       -       -       2,946       1,133       2,011       -       3,144  
Total assets     19,494       5,379       (4,612 )     20,261       14,214       5,324       -       19,538  
                                                                 
Revenues:                                                                
Verification and certification service revenue   $ 10,218     $ -     $ -     $ 10,218     $ 11,314     $ -     $ -     $ 11,314  
Product sales     2,883       -       -       2,883       2,362       -       -       2,362  
Software license, maintenance and support services revenue     -       715       (90 )     625       -       969       (147 )     822  
Software-related consulting service revenue     -       823       (24 )     799       -       661       (85 )     576  
Total revenues   $ 13,101     $ 1,538     $ (114 )   $ 14,525     $ 13,676     $ 1,630     $ (232 )   $ 15,074  
Costs of revenues:                                                                
Costs of verification and certification services   $ 5,373     $ -     $ (90 )   $ 5,283     $ 6,455     $ -     $ (123 )   $ 6,332  
Costs of products     1,869       -       -       1,869       1,538       -       -       1,538  
Costs of software license, maintenance and support services     -       393       -       393       -       469       -       469  
Costs of software-related consulting services     -       508       -       508       -       395       -       395  
Total costs of revenues     7,242       901       (90 )     8,053       7,993       864       (123 )     8,734  
Gross profit     5,859       637       (24 )     6,472       5,683       766       (109 )     6,340  
Depreciation & amortization     313       423       -       736       263       539       -       802  
Other operating expenses     4,206       483       (24 )     4,665       4,230       701       (109 )     4,822  
Segment operating (loss)/income   $ 1,340     $ (269 )   $ -     $ 1,071     $ 1,190     $ (474 )   $ -     $ 716  
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:                                                                
Other expense (income)     (107 )     2       -       (105 )     (90 )     (1 )     -       (91 )
Income tax expense     -       8       328       336       -       -       230       230  
Net loss attributable to non-controlling interest     -       -       -       -       -       182       -       182  
Net (loss)/income attributable to WFCF   $ 1,447     $ (279 )   $ (328 )   $ 840     $ 1,280     $ (291 )   $ (230 )   $ 759  
v3.20.2
Supplemental Cash Flow Information (Tables)
9 Months Ended
Sep. 30, 2020
Supplemental Cash Flow Information [Abstract]  
Schedule of Supplemental Cash Flow Information
   

Nine months ended

September 30,

 
    2020     2019  
Cash paid during the year:                
Interest expense   $ 5     $ 8  
Income taxes   $ 362     $ 131  
v3.20.2
Business Acquisitions (Details Narrative) - Postelsia Holdings, Ltd [Member]
$ in Thousands
Feb. 21, 2020
USD ($)
Cash payments for acquisition $ 250
Cash held in escrow $ 50
Estimated useful lives of intangible assets 8 years
v3.20.2
Basic and Diluted Net Income Per Share - Schedule of Reconciliation of Basic and Diluted Income Per Share Computations (Details) - shares
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Per share - net income attributable to Where Food Comes From, Inc.:        
Weighted average shares outstanding: Basic 24,745,000 24,792,000 24,857,000 24,879,000
Weighted average shares outstanding: Diluted 24,745,000 24,792,000 24,857,000 24,879,000
Weighted average effects of dilutive securities 149,000 180,000 154,000 183,000
Total 24,894,000 24,972,000 25,011,000 25,062,000
Antidilutive securities: 286,000 283,000 286,000 283,000
v3.20.2
Investment in Progressive Beef, LLC (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Dividend income $ 30 $ 30 $ 90 $ 90
Progressive Beef, LLC [Member]        
Dividend income $ 30 $ 30 $ 90 $ 90
v3.20.2
Intangible and Other Assets - Schedule of Intangible and Other Assets (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Dec. 31, 2019
Intangible and other assets, gross $ 5,257 $ 4,944
Less accumulated amortization 2,631 2,182
Intangible and other assets, net 2,626 2,762
Tradenames/trademarks (not subject to amortization) 465 465
Intangible assets 3,091 3,227
Other assets 14 21
Intangible and other assets: 3,105 3,248
Trade Names and Trademarks [Member]    
Intangible and other assets, gross 417 417
Accreditations [Member]    
Intangible and other assets, gross $ 85 85
Estimated useful lives of intangible assets 5 years  
Customer Relationships [Member]    
Intangible and other assets, gross $ 3,664 3,351
Patents [Member]    
Intangible and other assets, gross $ 970 970
Estimated useful lives of intangible assets 4 years  
Non-compete Agreements [Member]    
Intangible and other assets, gross $ 121 $ 121
Estimated useful lives of intangible assets 5 years  
Minimum [Member] | Trade Names and Trademarks [Member]    
Estimated useful lives of intangible assets 2 years 6 months  
Minimum [Member] | Customer Relationships [Member]    
Estimated useful lives of intangible assets 3 years  
Maximum [Member] | Trade Names and Trademarks [Member]    
Estimated useful lives of intangible assets 8 years  
Maximum [Member] | Customer Relationships [Member]    
Estimated useful lives of intangible assets 15 years  
v3.20.2
Accrued Expenses and Other Current Liabilities - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Payables and Accruals [Abstract]    
Income and sales taxes payable $ 483 $ 171
Payroll related accruals 398 201
Customer deposits 93 62
Professional fees and other expenses 205 240
Accrued expenses and other current liabilities $ 1,179 $ 674
v3.20.2
Notes Payable (Details Narrative) - USD ($)
9 Months Ended
Apr. 17, 2020
Sep. 30, 2020
Dec. 31, 2019
Paycheck Protection Program [Member]      
Revolving line of credit maturity date Apr. 17, 2022    
Debt interest rate 1.00%    
Proceeds from loans $ 1,000,000 $ 350,000,000,000  
Loans repayments term description The loan will be repaid in 17 monthly consecutive interest and principal payments of approximately $57,876.    
Loan interest and principal payments $ 57,876    
Revolving Line of Credit [Member]      
Revolving line of credit maturity date   Apr. 12, 2022  
Working capital   $ 75,080  
Interest rate, basis spread   1.50%  
Debt interest rate   4.75% 6.25%
v3.20.2
Stock-Based Compensation (Details Narrative) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Number of awarded stock options to purchase 8,000,000 10,000,000  
Stock options exercise price per share $ 1.80 $ 1.71 $ 1.80 $ 1.71
Employees [Member]        
Number of awarded stock options to purchase     20,000,000  
Stock options exercise price per share $ 2.05   $ 2.05  
v3.20.2
Stock-Based Compensation - Schedule of Stock-based Compensation Expense (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Total $ 25 $ 37 $ 80 $ 129
Stock Options [Member]        
Total 24 34 77 114
Restricted Stock Awards [Member]        
Total $ 1 $ 3 $ 3 $ 15
v3.20.2
Stock-Based Compensation - Schedule of Estimated Fair Value of Stock Options (Details) - shares
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]    
Number of options awarded to purchase common shares 28,000,000 10,000,000
Risk-free interest rate 1.19% 1.50%
Expected volatility 94.70% 100.30%
Assumed dividend yield
Expected life of options from the date of grant 9 years 9 months 18 days 9 years 9 months 18 days
v3.20.2
Stock-Based Compensation - Schedule of Unrecognized Compensation Cost from Unvested Awards (Details)
$ in Thousands
Sep. 30, 2020
USD ($)
Unvested stock options $ 137
Unvested restricted stock awards 2
Total unrecognized compensation expense 139
2020 (Remaining Three Months) [Member]  
Unvested stock options 30
Unvested restricted stock awards 1
Total unrecognized compensation expense 31
2021 [Member]  
Unvested stock options 83
Unvested restricted stock awards 1
Total unrecognized compensation expense 84
2022 [Member]  
Unvested stock options 20
Unvested restricted stock awards
Total unrecognized compensation expense 20
2023 [Member]  
Unvested stock options 4
Unvested restricted stock awards
Total unrecognized compensation expense $ 4
v3.20.2
Stock-Based Compensation - Schedule of Stock Option Activity (Details) - USD ($)
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Share-based Payment Arrangement [Abstract]    
Number of stock options, Beginning Balance 437,126,000  
Number of stock options, Granted 28,000,000 10,000,000
Number of stock options, Exercised (10,000,000)  
Number of stock options, Expired/Forfeited (25,325,000)  
Number of stock options, Ending Balance 429,801,000  
Number of stock options, Exercisable Ending 315,686,000  
Number of stock options, Unvested Ending 114,115,000  
Weighted avg exercise price per share, Beginning Balance $ 1.46  
Weighted avg exercise price per share, Granted 1.72  
Weighted avg exercise price per share, Exercised 0.24  
Weighted avg exercise price per share, Expired/Forfeited  
Weighted avg exercise price per share, Ending Balance 1.49  
Weighted avg exercise price per share, Exercisable Ending 1.38  
Weighted avg exercise price per share, Unvested Ending 1.77  
Weighted avg grant date fair value per share, Beginning Balance 1.49  
Weighted avg grant date fair value per share, Granted 1.98  
Weighted avg grant date fair value per share, Exercised 0.24  
Weighted avg grant date fair value per share, Expired/Forfeited 1.84  
Weighted avg grant date fair value per share, Ending Balance 1.53  
Weighted avg grant date fair value per share, Exercisable Ending 1.40  
Weighted avg grant date fair value per share, Unvested Ending $ 1.90  
Weighted avg remaining contractual life (in years), Beginning Balance 5 years 11 months 19 days  
Weighted avg remaining contractual life (in years), Granted 9 years 6 months 25 days  
Weighted avg remaining contractual life (in years), Exercised 6 months  
Weighted avg remaining contractual life (in years), Expired/Forfeited 6 years 11 months 23 days  
Weighted avg remaining contractual life (in years), Ending Balance 5 years 6 months 3 days  
Weighted avg remaining contractual life (in years), Exercisable Ending 4 years 5 months 9 days  
Weighted avg remaining contractual life (in years), Unvested Ending 8 years 5 months 20 days  
Aggregate intrinsic value, Beginning Balance $ 150,417  
Aggregate intrinsic value, Ending Balance 147,950  
Aggregate intrinsic value, Exercisable Ending 147,350  
Aggregate intrinsic value, Unvested Ending $ 600  
v3.20.2
Stock-Based Compensation - Schedule of Restricted Stock Activity Under Equity Incentive Plan (Details)
9 Months Ended
Sep. 30, 2020
$ / shares
shares
Share-based Payment Arrangement [Abstract]  
Number of restricted stock options, Beginning Balance | shares 5,000,000
Number of restricted stock options, Granted | shares
Number of restricted stock options, Vested | shares
Number of restricted stock options, Forfeited | shares
Number of restricted stock options, Ending Balance | shares 5,000,000
Weighted avg grant date fair value, Beginning Balance | $ / shares $ 2.55
Weighted avg grant date fair value, Granted | $ / shares
Weighted avg grant date fair value, Vested | $ / shares
Weighted avg grant date fair value, Forfeited | $ / shares
Weighted avg grant date fair value, Ending Balance | $ / shares $ 2.55
v3.20.2
Income Taxes (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Income Tax Disclosure [Abstract]        
Income tax benefit $ 271 $ 184 $ 336 $ 230
v3.20.2
Revenue Recognition (Details Narrative) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]      
Accounts receivable from contracts with customers, net of allowance for doubtful accounts $ 2,500   $ 2,500
Deferred revenue from contracts with customers $ 1,148 $ 1,206 $ 797
v3.20.2
Revenue Recognition - Schedule of Revenues Disaggregated by Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Segment Reporting Information [Line Items]        
Total revenues $ 6,197 $ 6,232 $ 14,525 $ 15,075
Verification and Certification Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 4,307 4,759 10,218 11,314
Software License, Maintenance and Support Services Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 245 227 625 822
Software-Related Consulting Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 283 160 799 576
Verification and Certification Segment [Member]        
Segment Reporting Information [Line Items]        
Total revenues 5,669 5,845 13,101 13,677
Verification and Certification Segment [Member] | Verification and Certification Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 4,307 4,759 10,218 11,314
Verification and Certification Segment [Member] | Product Sales [Member]        
Segment Reporting Information [Line Items]        
Total revenues 1,362 1,086 2,883 2,363
Verification and Certification Segment [Member] | Software-Related Consulting Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues
Verification and Certification Segment [Member] | Software License, Maintenance and Support Services Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues
Verification and Certification Segment [Member] | Software License, Maintenance and Support Services Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues    
Verification and Certification Segment [Member] | Software-Related Consulting Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues    
Software Sales and Related Consulting Segment [Member]        
Segment Reporting Information [Line Items]        
Total revenues 528 484 1,538 1,630
Software Sales and Related Consulting Segment [Member] | Verification and Certification Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues
Software Sales and Related Consulting Segment [Member] | Product Sales [Member]        
Segment Reporting Information [Line Items]        
Total revenues
Software Sales and Related Consulting Segment [Member] | Software-Related Consulting Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 283 197 823 661
Software Sales and Related Consulting Segment [Member] | Software License, Maintenance and Support Services Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 245 287 715 969
Eliminations and Other [Member]        
Segment Reporting Information [Line Items]        
Total revenues (97) (114) (232)
Eliminations and Other [Member] | Verification and Certification Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues
Eliminations and Other [Member] | Product Sales [Member]        
Segment Reporting Information [Line Items]        
Total revenues
Eliminations and Other [Member] | Software-Related Consulting Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues (37) (24) (85)
Eliminations and Other [Member] | Software License, Maintenance and Support Services Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues (60) (90) (147)
Eliminations and Other [Member] | Verification and Certification Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues
Consolidated [Member]        
Segment Reporting Information [Line Items]        
Total revenues 6,197 6,232 14,525 15,075
Consolidated [Member] | Verification and Certification Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 4,307 4,759 10,218 11,314
Consolidated [Member] | Product Sales [Member]        
Segment Reporting Information [Line Items]        
Total revenues 1,362 1,086 2,883 2,363
Consolidated [Member] | Software-Related Consulting Service Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues 283 160 799 576
Consolidated [Member] | Software License, Maintenance and Support Services Revenue [Member]        
Segment Reporting Information [Line Items]        
Total revenues $ 245 $ 227 $ 625 $ 822
v3.20.2
Revenue Recognition - Schedule of Changes in Contract Liabilities (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]    
Unearned revenue, Beginning balance $ 1,206 $ 797
Unearned billings 671 2,408
Revenue recognized (729) (2,057)
Unearned revenue, Ending balance $ 1,148 $ 1,148
v3.20.2
Leases (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Operating lease cost $ 116 $ 115 $ 348 $ 353
The Move, LLC [Member]        
Ownership interest 24.30%   24.30%  
Corporate Headquarters [Member]        
Operating lease cost $ 92   $ 276  
v3.20.2
Leases - Schedule of Lease Expense (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Leases [Abstract]        
Operating lease cost $ 116 $ 115 $ 348 $ 353
Finance lease cost amortization of assets 2 2 6 6
Interest on finance lease obligations 1 2 4 6
Variable lease cost
Total net lease cost $ 119 $ 119 $ 358 $ 365
v3.20.2
Leases - Schedule of Supplemental Balance Sheet Information Related to Leases (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Operating lease ROU assets $ 3,073 $ 3,268
Current operating lease liabilities 260 239
Noncurrent operating lease liabilities 3,328 3,526
Total operating lease liabilities 3,588 3,765
Finance leases: Right of use asset, at cost 43 43
Finance leases: Accumulated amortization (27) (22)
Finance leases: Right of use asset, net 16 21
Current obligations of finance leases 9 8
Finance leases, net of current obligations 14 21
Total finance lease liabilities $ 23 $ 29
Weighted average remaining operating lease term (in years) 10 years 2 months 12 days 11 years
Weighted average remaining finance lease term (in years) 2 years 4 months 24 days 3 years
Operating leases weighted average discount rate 5.80% 5.80%
Finance leases weighted average discount rate 20.90% 20.80%
Related Party [Member]    
Operating lease ROU assets $ 2,800 $ 2,933
Current operating lease liabilities 174 158
Noncurrent operating lease liabilities 3,127 3,260
Total operating lease liabilities 3,301 3,418
Other [Member]    
Operating lease ROU assets 257 314
Current operating lease liabilities 86 81
Noncurrent operating lease liabilities 201 266
Total operating lease liabilities $ 287 $ 347
v3.20.2
Leases - Schedule of Supplemental Cash Flow Information Related to Leases (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Leases [Abstract]        
Operating cash flows from operating leases $ 113 $ 109 $ 335 $ 320
Operating cash flows from finance leases 1 2 4 6
Financing cash flows from finance leases 2 2 6 5
ROU assets obtained in exchange for lease liabilities: Operating leases $ 3,507 $ 3,513 $ 3,507 $ 3,513
v3.20.2
Leases - Schedule of Maturities of Operating Lease and Finance Lease Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Dec. 31, 2019
Leases [Abstract]    
2020 (remaining three months) $ 114  
2021 462  
2022 466  
2023 461  
2024 407  
Thereafter 2,901  
Total lease payments 4,811  
Less amount representing interest (1,223)  
Total lease obligations 3,588 $ 3,765
Less current portion (260) (239)
Long-term lease obligations 3,328 3,526
2020 (remaining three months) 3  
2021 12  
2022 10  
2023 5  
2024  
Thereafter  
Total lease payments 30  
Less amount representing interest (7)  
Total lease obligations 23 29
Less current portion (9) (8)
Long-term lease obligations $ 14 $ 21
v3.20.2
Segments (Details Narrative)
9 Months Ended
Sep. 30, 2020
Integer
Segment Reporting [Abstract]  
Number of operating segment 1
v3.20.2
Segments - Schedule of Operating Segments (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Dec. 31, 2019
Segment Reporting Information [Line Items]                  
Goodwill $ 2,946           $ 2,946   $ 2,946
Total assets 20,261           20,261   $ 18,237
Total revenues 6,197     $ 6,232     14,525 $ 15,075  
Total costs of revenues 3,435     3,645     8,053 8,734  
Gross profit 2,762     2,587     6,472 6,341  
Depreciation & amortization             736 802  
Segment operating (loss)/income 956     614     1,071 717  
Income tax expense 271     184     336 230  
Net loss attributable to non-controlling interest     81     182  
Net (loss)/income attributable to WFCF 730 $ 351 $ (241) 541 $ 361 $ (143) 840 759  
Verification and Certification Segment [Member]                  
Segment Reporting Information [Line Items]                  
Intangible and other assets, net 7,079     1,344     7,079 1,344  
Goodwill 2,946     1,133     2,946 1,133  
Total assets 19,494     14,214     19,494 14,214  
Total revenues 5,669     5,845     13,101 13,677  
Total costs of revenues 3,099     3,430     7,242 7,993  
Gross profit 2,570     2,415     5,859 5,683  
Depreciation & amortization 112     78     313 263  
Other operating expenses 1,404     1,520     4,206 4,230  
Segment operating (loss)/income 1,054     817     1,340 1,190  
Other expense (income) (47)     (30)     (107) (90)  
Income tax expense          
Net loss attributable to non-controlling interest          
Net (loss)/income attributable to WFCF 1,101     847     1,447 1,280  
Verification and Certification Segment [Member] | Verification and Certification Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 4,307     4,759     10,218 11,314  
Total costs of revenues 2,233     2,733     5,373 6,455  
Verification and Certification Segment [Member] | Product Sales [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 1,362     1,086     2,883 2,363  
Total costs of revenues 866     697     1,869 1,538  
Verification and Certification Segment [Member] | Software License, Maintenance and Support Services Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues          
Total costs of revenues          
Verification and Certification Segment [Member] | Software-Related Consulting Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues          
Total costs of revenues          
Software Sales and Related Consulting Segment [Member]                  
Segment Reporting Information [Line Items]                  
Intangible and other assets, net 3,856     2,054     3,856 2,054  
Goodwill     2,011     2,011  
Total assets 5,379     5,324     5,379 5,324  
Total revenues 528     484     1,538 1,630  
Total costs of revenues 336     275     901 864  
Gross profit 192     209     637 766  
Depreciation & amortization 145     179     423 539  
Other operating expenses 145     233     483 701  
Segment operating (loss)/income (98)     (203)     (269) (474)  
Other expense (income) 2         2 (1)  
Income tax expense 8         8  
Net loss attributable to non-controlling interest     81     182  
Net (loss)/income attributable to WFCF (108)     (122)     (279) (291)  
Software Sales and Related Consulting Segment [Member] | Verification and Certification Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues          
Total costs of revenues          
Software Sales and Related Consulting Segment [Member] | Product Sales [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues          
Total costs of revenues          
Software Sales and Related Consulting Segment [Member] | Software License, Maintenance and Support Services Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 245     287     715 969  
Total costs of revenues 138     153     393 469  
Software Sales and Related Consulting Segment [Member] | Software-Related Consulting Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 283     197     823 661  
Total costs of revenues 198     122     508 395  
Eliminations and Other [Member]                  
Segment Reporting Information [Line Items]                  
Intangible and other assets, net (7,830)         (7,830)  
Goodwill          
Total assets (4,612)         (4,612)  
Total revenues     (97)     (114) (232)  
Total costs of revenues     (60)     (90) (123)  
Gross profit     (37)     (24) (109)  
Depreciation & amortization          
Other operating expenses     (37)     (24) (109)  
Segment operating (loss)/income          
Other expense (income)          
Income tax expense 263     184     328 230  
Net loss attributable to non-controlling interest          
Net (loss)/income attributable to WFCF (263)     (184)     (328) (230)  
Eliminations and Other [Member] | Verification and Certification Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues          
Total costs of revenues     (60)     (90) (123)  
Eliminations and Other [Member] | Product Sales [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues          
Total costs of revenues          
Eliminations and Other [Member] | Software License, Maintenance and Support Services Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues     (60)     (90) (147)  
Total costs of revenues          
Eliminations and Other [Member] | Software-Related Consulting Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues     (37)     (24) (85)  
Total costs of revenues          
Consolidated [Member]                  
Segment Reporting Information [Line Items]                  
Intangible and other assets, net 3,105     3,398     3,105 3,398  
Goodwill 2,946     3,144     2,946 3,144  
Total assets 20,261     19,538     20,261 19,538  
Total revenues 6,197     6,232     14,525 15,075  
Total costs of revenues 3,435     3,645     8,053 8,734  
Gross profit 2,762     2,587     6,472 6,340  
Depreciation & amortization 257     257     736 802  
Other operating expenses 1,549     1,716     4,665 4,822  
Segment operating (loss)/income 956     614     1,071 716  
Other expense (income) (45)     (30)     (105) (91)  
Income tax expense 271     184     336 230  
Net loss attributable to non-controlling interest     81     182  
Net (loss)/income attributable to WFCF 730     541     840 759  
Consolidated [Member] | Verification and Certification Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 4,307     4,759     10,218 11,314  
Total costs of revenues 2,233     2,673     5,283 6,332  
Consolidated [Member] | Product Sales [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 1,362     1,086     2,883 2,363  
Total costs of revenues 866     697     1,869 1,538  
Consolidated [Member] | Software License, Maintenance and Support Services Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 245     227     625 822  
Total costs of revenues 138     153     393 469  
Consolidated [Member] | Software-Related Consulting Service Revenue [Member]                  
Segment Reporting Information [Line Items]                  
Total revenues 283     160     799 576  
Total costs of revenues $ 198     $ 122     $ 508 $ 395  
v3.20.2
Supplemental Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Supplemental Cash Flow Information [Abstract]    
Interest expense $ 5 $ 8
Income taxes $ 362 $ 131
v3.20.2
Subsequent Events (Details Narrative) - Paycheck Protection Program [Member]
Oct. 01, 2020
Apr. 17, 2020
Debt instruments payment description   The loan will be repaid in 17 monthly consecutive interest and principal payments of approximately $57,876.
Subsequent Event [Member]    
Debt instruments payment description On October 1, 2020 the Paycheck Protection Program ("PPP") loan had a change in terms agreement modifying the beginning date of the principal and interest payments from December 1, 2020 to May 1, 2021.