Notes
to the Consolidated Financial Statements
(Unaudited)
Recently
Issued Accounting Pronouncements
Lease
Accounting
In
February 2016, the FASB issued ASU 2016-02, “Leases,” which will require lessees to recognize a right-of-use asset
and a lease liability for all leases that are not short-term in nature. For a lessor, the accounting applied is largely unchanged
from previous guidance. The new rules will be effective for the Company in the first quarter of 2019. The Company is currently
in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations
and cash flows. Although the evaluation is ongoing, the Company expects that the adoption will impact the Company’s financial
statements as the standard requires the recognition on the balance sheet of a right of use asset and corresponding lease liability
for all leases, including operating leases, that are not short-term, which differs from current guidance. The Company is currently
analyzing its contracts to determine whether they contain a lease under the revised guidance and has not quantified the amount
of the asset and liability that will be recognized on the Company’s balance sheet.
Revenue
from Contracts with Customers
In
May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes current
revenue recognition requirements and industry-specific guidance. The codification was amended through additional ASUs and, as
amended, requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects
the consideration the entity expects to be entitled to in exchange for those goods or services. The Company is required to adopt
the new standard in the first quarter of 2018 and may adopt either retrospectively to each prior reporting period presented or
as a cumulative-effect adjustment as of the date of adoption using one of two retrospective application methods. The Company has
developed an approach for the implementation of the guidance including a review of revenue streams and contracts to identify any
differences in timing, measurement or presentation of revenue recognition. Currently, the Company has not completed its estimate
of the quantitative impact and has engaged a third party to assist in its evaluation. While the Company is still in the process
of completing its evaluation of the standard, it currently believes the most significant impact will be related to accounting
for its software license, maintenance and support revenue, and the timing in which those revenues are recognized.
Clarifying
the Definition of a Business
In
January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business,” which provides guidance on evaluating
whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU amends ASC 805 to
provide a more robust framework to use in determining when a set of assets and activities is a business. In addition, the amendments
provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more
operable.
The new guidance will be effective
for the Company in the first quarter of 2018.
The Company is currently evaluating the provisions
of this new guidance and
has not determined the impact this standard may have on its financial condition, results of operations,
cash flows and related disclosures.
Simplifying
the Test for Goodwill Impairment
In
April 2017, the FASB has issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which removes step 2
from the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the
amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed
the total amount of goodwill allocated to that reporting unit.
The
Company is required to adopt the new standard in 2020.
The Company is currently evaluating the
provisions of this new guidance and
has not determined the impact this standard may have on its financial condition, results
of operations, cash flows and related disclosures.
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
Note
2 – Business Acquisitions
SureHarvest
Acquisition
On
December 28, 2016,
we entered into an Asset Purchase
Agreement (the “SureHarvest Purchase Agreement”), by and among the Company, SureHarvest Services LLC (the “Buyer”
or “SureHarvest”); and SureHarvest, Inc., a California corporation (the “Seller” or “SureHarvest,
Inc.”). We acquired substantially all the assets of the Seller. SureHarvest develops software and provides services related
to sustainability measurement and benchmarking, traceability, verification and certification to the food and agriculture industries.
Pursuant
to the SureHarvest Purchase Agreement, WFCF purchased the business assets of the Seller for total consideration of approximately
$2.8 million, comprised of approximately $1,122,000 in cash and 850,852 shares of common stock of WFCF valued at approximately
$1,710,000 based on the closing price of our stock on December 28, 2016, of $2.01 per share. Additionally, we issued the Seller
a 40% membership interest in SureHarvest, with the Company holding a 60% interest.
Following
the thirty-six-month anniversary of the effective date of the SureHarvest Purchase Agreement, the Company shall have the option,
but not the obligation, to purchase all the units (the 40% interest) of SureHarvest held by the Seller, and the Seller shall have
the option, but not the obligation, to require the Company to purchase all the units of SureHarvest held by the Seller. The purchase
price for the units shall be equal to the amount the selling holders of the units would be entitled to receive upon a liquidation
of SureHarvest assuming all of the assets of SureHarvest are sold for a purchase price equal to the product of eight and half
times trailing twelve-month earnings before income taxes, depreciation and amortization, as defined, subject to an $8 million
ceiling.
Because
SureHarvest, Inc. at its option, can require the Company to purchase its 40% interest in SureHarvest, the SureHarvest non-controlling
interest meets the definition of a contingently redeemable non-controlling interest. Redeemable non-controlling interests are
presented at the greater of their carrying amount or redemption value at the end of each reporting period and are shown as a separate
caption between liabilities and equity (mezzanine section) in the accompanying consolidated balance sheet.
The
following unaudited pro forma information presents the results of operations for the three and nine months ended September 30,
2016, as if the acquisition of SureHarvest had occurred on January 1, 2016. This pro forma information does not reflect any integration
activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that could result
from the acquisition, nor does it purport to represent what the Company’s actual results would have been if the acquisition
had occurred as of the date indicated or what such results would be for any future periods.
|
|
Three
months
|
|
|
Year
to date
|
|
|
|
ended
|
|
|
ended
|
|
|
|
September 30,
2016
|
|
|
September 30,
2016
|
|
Total revenue
|
|
$
|
3,732,770
|
|
|
$
|
9,622,988
|
|
Net income attributable to Where Food
Comes From, Inc.
|
|
$
|
229,434
|
|
|
$
|
397,259
|
|
Basic and diluted earnings per share
|
|
$
|
0.01
|
|
|
$
|
0.02
|
|
* less than $0.01 per share
|
|
|
|
|
|
|
|
|
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
A
Bee Organic Acquisition
On
May 30, 2017, we acquired A Bee Organic for $150,000 in cash and 45,684 shares of common stock of WFCF valued at approximately
$98,000 based on the closing price of our stock on May 30, 2017, of $2.15 per share. The acquisition primarily consisted of the
existing customer relationships and represents further expansion of our verification and certification solutions into hydroponics/aquaponics
and apiary spaces. We believe the total consideration paid approximates the fair value of the assets acquired. We have allocated
the total consideration to our identifiable intangible assets to be amortized over an estimated useful life of 8 years.
Note
3 – Basic and Diluted Net Income per Share
Basic
net income per share was computed by dividing income available to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted net income per share is based on the assumption that all dilutive convertible shares
and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method,
options and restricted stock awards are assumed to be exercised at the beginning of the period (or at the time of issuance, if
later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
The
following is a reconciliation of the share data used in the basic and diluted income per share computations:
|
|
Three months ended
September
30,
|
|
|
Year to date ended
September
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
24,705,934
|
|
|
|
23,772,967
|
|
|
|
24,673,080
|
|
|
|
23,817,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
24,705,934
|
|
|
|
23,772,967
|
|
|
|
24,673,080
|
|
|
|
23,817,980
|
|
Weighted
average effects of dilutive securities
|
|
|
180,213
|
|
|
|
156,044
|
|
|
|
161,851
|
|
|
|
151,154
|
|
Total
|
|
|
24,886,147
|
|
|
|
23,929,011
|
|
|
|
24,834,931
|
|
|
|
23,969,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidilutive
securities:
|
|
|
94,000
|
|
|
|
25,668
|
|
|
|
94,000
|
|
|
|
25,168
|
|
The
effect of the inclusion of the antidilutive shares would have resulted in an increase in earnings per share. Accordingly, the
weighted average shares outstanding have not been adjusted for antidilutive shares.
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
Note
4 – Intangible and Other Assets
The
following table summarizes our intangible and other assets:
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
December
31,
|
|
|
Estimated
|
|
|
2017
|
|
|
2016
|
|
|
Useful
life
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
Tradenames
and Trademarks
|
|
$
|
282,307
|
|
|
$
|
282,307
|
|
|
2.5 - 8.0 years
|
Accreditations
|
|
|
88,663
|
|
|
|
88,663
|
|
|
5.0 years
|
Customer Relationships
|
|
|
3,084,551
|
|
|
|
2,836,330
|
|
|
8.0 - 15.0 years
|
Beneficial Lease
Arrangement
|
|
|
120,200
|
|
|
|
120,200
|
|
|
11.0 years
|
Patents
|
|
|
970,100
|
|
|
|
970,100
|
|
|
4.0 years
|
|
|
|
4,545,821
|
|
|
|
4,297,600
|
|
|
|
Less accumulated
amortization
|
|
|
947,506
|
|
|
|
547,917
|
|
|
|
|
|
|
3,598,315
|
|
|
|
3,749,683
|
|
|
|
Tradenames/trademarks
(not subject to amortization)
|
|
|
465,000
|
|
|
|
465,000
|
|
|
|
|
|
|
4,063,315
|
|
|
|
4,214,683
|
|
|
|
Deposit
|
|
|
13,545
|
|
|
|
13,545
|
|
|
|
|
|
$
|
4,076,860
|
|
|
$
|
4,228,228
|
|
|
|
Note
5 – Stock-Based Compensation
In
addition to cash compensation, the Company may compensate certain service providers, including employees, directors, consultants,
and other advisors, with equity based compensation in the form of stock options and restricted stock awards. The Company recognizes
all equity-based compensation as stock-based compensation expense based on the fair value of the compensation measured at the
grant date. For stock options, fair value is calculated at the date of grant using the Black-Scholes-Merton option pricing model.
For restricted stock awards, fair value is the closing stock price for the Company’s common stock on the grant date. The expense
is recognized over the vesting period of the grant. For the periods presented, all stock-based compensation expense was classified
as a component within selling, general and administrative expense in the Company’s consolidated statements of income.
The
amount of stock-based compensation expense is as follows:
|
|
Three months ended
September 30,
|
|
|
Year to date ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Stock options
|
|
$
|
14,687
|
|
|
$
|
5,855
|
|
|
$
|
44,100
|
|
|
$
|
26,297
|
|
Restricted
stock awards
|
|
|
26,480
|
|
|
|
21,774
|
|
|
|
86,537
|
|
|
|
58,160
|
|
Total
|
|
$
|
41,167
|
|
|
$
|
27,629
|
|
|
$
|
130,637
|
|
|
$
|
84,45
7
|
|
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
As
of September 30, 2017, the estimated unrecognized compensation cost from unvested awards which will be recognized ratably over
the remaining vesting phase is as follows:
Years
ended December 31st:
|
|
|
Unvested
stock
options
|
|
|
Unvested
restricted stock
awards
|
|
|
Total
Unrecognized
Compensation
Expense
|
|
2017 (three
months remaining)
|
|
|
$
|
14,715
|
|
|
$
|
23,781
|
|
|
$
|
38,496
|
|
2018
|
|
|
|
58,695
|
|
|
|
62,833
|
|
|
|
121,528
|
|
2019
|
|
|
|
53,552
|
|
|
|
11,426
|
|
|
|
64,978
|
|
|
|
|
$
|
126,962
|
|
|
$
|
98,040
|
|
|
$
|
225,002
|
|
Equity
Incentive Plans
Our
2016 Equity Incentive Plan (the “Equity Incentive Plan”) provides for the issuance of stock-based awards to employees,
officers, directors and consultants. The Plan permits the granting of stock awards and stock options. The vesting of stock-based
awards is generally subject to the passage of time and continued employment through the vesting period.
Stock
Option Activity
Stock
option activity under our Equity Incentive Plan is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Avg.
|
|
|
|
|
|
|
|
|
|
|
Weighted
Avg.
|
|
|
Weighted
Avg.
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
Number
of
|
|
|
Exercise
Price
|
|
|
Fair
Value
|
|
|
Contractual
Life
|
|
|
Intrinsic
|
|
|
|
|
Awards
|
|
|
per
Share
|
|
|
per
Share
|
|
|
(in
years)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2016
|
|
|
|
273,586
|
|
|
$
|
1.22
|
|
|
$
|
1.22
|
|
|
|
7.05
|
|
|
$
|
217,892
|
|
Granted
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
|
|
Exercised
|
|
|
|
(7,001
|
)
|
|
$
|
1.17
|
|
|
$
|
1.24
|
|
|
|
5.76
|
|
|
|
|
|
Expired/Forfeited
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
|
|
Outstanding, September
30, 2017
|
|
|
|
266,585
|
|
|
$
|
1.23
|
|
|
$
|
1.22
|
|
|
|
6.31
|
|
|
$
|
294,559
|
|
Exercisable, September
30, 2017
|
|
|
|
172,585
|
|
|
$
|
0.86
|
|
|
$
|
0.87
|
|
|
|
4.74
|
|
|
$
|
253,199
|
|
Unvested, September
30, 2017
|
|
|
|
94,000
|
|
|
$
|
1.89
|
|
|
$
|
1.87
|
|
|
|
9.21
|
|
|
$
|
41,360
|
|
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, 2017 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, 2017.
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, 2016
|
|
|
|
136,000
|
|
|
$
|
2.44
|
|
Granted
|
|
|
|
—
|
|
|
$
|
—
|
|
Vested
|
|
|
|
(10,250
|
)
|
|
$
|
2.15
|
|
Forfeited
|
|
|
|
(18,750
|
)
|
|
$
|
2.18
|
|
Non-vested restricted
shares, September 30, 2017
|
|
|
|
107,000
|
|
|
$
|
2.52
|
|
Note
6 – 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. Our net operating loss (“NOL”) carry forwards
are the most significant component of our deferred tax assets; however, the ultimate realization of our deferred tax assets is
dependent upon generation of future taxable income. We consider past history, the scheduled reversal of taxable temporary differences,
projected future taxable income, and tax planning strategies in making this assessment. Utilization of our NOL carry forwards
reduces our federal and state income tax liability incurred.
The
Company’s subsidiary, SureHarvest, is a California limited liability company (“LLC”). As an LLC, management
believes SureHarvest is not subject to income taxes, and such taxes are the responsibility of the respective members.
The
provision or benefit for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its
effective income tax rate expected to be applicable for the full fiscal year. For the three months ended September 30, 2017 and
2016, we recorded income tax expense of $199,000 and $135,000 respectively. For the nine months ended September 30, 2017 and 2016,
we recorded income tax expense of $150,000 and $264,950 respectively.
Note
7 – Notes Payable
Notes
Payable consist of the following:
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
Medved Ford Inc. Loan
|
|
$
|
54,165
|
|
|
$
|
—
|
|
Less current portion
of notes payable
|
|
|
8,525
|
|
|
|
—
|
|
Long-term portion
of notes payable
|
|
$
|
45,640
|
|
|
$
|
—
|
|
In
September 2017, we entered into a note payable of $54,165 for the purchase of a vehicle. Interest and principal payments are due
in equal monthly installments of $1,087 over five years beginning October 2017. This note bears an interest rate of 7.44% per
annum and is fully secured by the vehicle.
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
Note
8 – Commitments and Contingencies
Unison
Revolving Line of Credit
The
Company has a revolving line of credit (“LOC”) agreement which matures April 12, 2020. The LOC provides for $75,080
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, 2017, the effective interest rate was 5.5%.
The LOC is collateralized by all the business assets of ICS. As of September 30, 2017, there were no amounts outstanding under
this LOC.
Operating
Leases & Lease Incentive Obligation
The
Company relocated its headquarters within Castle Rock, Colorado, during the third quarter 2016 and entered into a new lease agreement
with The Move, LLC for approximately 8,000 square feet of office space. This space is being leased from a company in which our
CEO and President, each a related party to the Company, have a 27% ownership interest. The lease agreement has an initial term
of five years plus two renewal periods, which the Company is more likely than not to renew. The office space lease term commenced
August 1, 2016. Rental payments are approximately $19,000 per month, which includes common area charges, and provides for escalating
rental payments annually over the term of the lease. The Company recognizes rent expense on a straight-line basis over the non-cancelable
lease term and option renewal periods. The resulting deferred rent is included in accrued expenses and other current liabilities
on the consolidated balance sheet.
The
Company recorded leasehold improvements of approximately $406,400, which included approximately $163,000 in lease incentives.
Leasehold improvements are included in property and equipment on the consolidated balance sheet. Lease incentives have been included
in lease incentive obligation as a long-term liability on the consolidated balance sheet and will reduce rent expense on a straight-line
basis over 15 years. Lease incentives are excluded from minimum lease payments in the schedule below.
In
August 2017, the Company entered into the first amendment of its lease agreement with The Move, LLC to provide for an additional
7,700 square feet of office space to commence December 1, 2017. The additional space is currently not approved for occupancy.
Total rental payments beginning December 1, 2017 will increase to approximately $27,000 per month, which includes common area
charges, and provides for escalating rental payments annually over the term of the lease. The Company will also receive approximately
$230,000 in lease incentives to build-out the new additional square footage. All other terms will remain the same.
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
As
of September 30, 2017, future minimum lease payments for all operating leases are as follows:
Years
ended December 31st:
|
|
|
Total
|
|
2017 (remaining
three months)
|
|
|
$
|
77,611
|
|
2018
|
|
|
|
364,564
|
|
2019
|
|
|
|
362,630
|
|
2020
|
|
|
|
349,755
|
|
2021
|
|
|
|
360,287
|
|
Thereafter
|
|
|
|
4,048,955
|
|
Total lease commitments
|
|
|
$
|
5,563,80
2
|
|
Legal
proceedings
From
time to time, we may become involved in various legal actions, administrative proceedings and claims in the ordinary course of
business. We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to
the extent they are probable and estimable. We are not aware of any legal actions currently pending against us.
Note
9 – Contingently Redeemable Non-Controlling Interest
Contingently
redeemable non-controlling interest on our consolidated balance sheet represents the non-controlling interest related to the SureHarvest
acquisition, in which the non-controlling interest holder, at its election, can require the Company to purchase its 40% investment
in SureHarvest. Below is a table reflecting the activity of the contingently redeemable non-controlling interest at September
30, 2017.
Balance, December 31, 2016
|
|
$
|
1,888,135
|
|
Net
loss attributable to non-controlling interest in SureHarvest for the nine months ended Sept 30, 2017
|
|
|
(286,841
|
)
|
Balance, September 30, 2017
|
|
$
|
1,601,294
|
|
The
contingently redeemable non-controlling interest was adjusted to the greater of the carrying value or redemption value as of each
period end.
Note
10 - Segments
With
each acquisition, we assess the need to disclose discrete information related to our operating segments. Because of the similarities
of certain of our acquisitions that provide certification and verification services, we aggregate operations into one verification
and certification services reportable segment. The factors considered in determining this aggregated reporting segment include
the economic similarity of the businesses, the nature of services provided, production processes, types of customers and distribution
methods. The Company’s chief operating decision maker (the Company’s CEO) allocates resources and assesses the performance
of its certification and verification services activities as one segment, which includes products sales.
With
the acquisition of SureHarvest Services, the Company determined that it also has a software sales and related consulting services
segment, which meet the quantitative threshold to be considered a reporting segment in the third quarter 2017. This segment includes
software license, maintenance, support and consulting service revenues.
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
Management
makes decisions, measures performance, and manages the business utilizing internal reporting operating segment information. Performance
of operating segments are based on net sales, gross profit, selling, general and administrative expenses and most importantly,
operating income.
The
company eliminates intercompany transfers between segments for management reporting purposes. The following table shows information
for reportable operating segments:
|
|
Three months ended
September 30,
|
|
|
Year to date ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Verification and Certification Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
10,409,289
|
|
|
$
|
9,442,909
|
|
|
$
|
10,409,289
|
|
|
$
|
9,442,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verification and
certification revenues
|
|
$
|
3,672,587
|
|
|
$
|
2,963,853
|
|
|
$
|
9,152,520
|
|
|
$
|
7,733,613
|
|
Products
sales
|
|
|
687,235
|
|
|
|
380,393
|
|
|
|
1,226,141
|
|
|
|
855,986
|
|
Total
segment revenue
|
|
$
|
4,359,822
|
|
|
$
|
3,344,246
|
|
|
$
|
10,378,661
|
|
|
$
|
8,589,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit - verification
and certification gross profit
|
|
$
|
1,825,680
|
|
|
$
|
1,441,650
|
|
|
$
|
4,474,382
|
|
|
$
|
3,760,314
|
|
Gross
profit - products
|
|
|
276,926
|
|
|
|
159,794
|
|
|
|
482,833
|
|
|
|
365,824
|
|
Total
segment gross profit
|
|
$
|
2,102,606
|
|
|
$
|
1,601,444
|
|
|
$
|
4,957,215
|
|
|
$
|
4,126,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
1,558,442
|
|
|
|
1,239,834
|
|
|
|
3,920,771
|
|
|
|
3,412,211
|
|
Segment
operating income
|
|
$
|
544,164
|
|
|
$
|
361,610
|
|
|
$
|
1,036,444
|
|
|
$
|
713,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
Sales and Related Consulting Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
4,443,117
|
|
|
$
|
—
|
|
|
$
|
4,443,117
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software license,
maintenance and support services
|
|
|
243,186
|
|
|
$
|
—
|
|
|
$
|
532,684
|
|
|
$
|
—
|
|
Consulting
service revenue
|
|
|
131,427
|
|
|
|
—
|
|
|
|
399,120
|
|
|
|
—
|
|
Total
segment revenue
|
|
$
|
374,613
|
|
|
$
|
—
|
|
|
$
|
931,804
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit - software
license, maintenance and support services
|
|
$
|
101,284
|
|
|
$
|
—
|
|
|
$
|
170,544
|
|
|
$
|
—
|
|
Gross
profit - consulting service revenue
|
|
|
87,446
|
|
|
|
—
|
|
|
|
216,402
|
|
|
|
—
|
|
Total
segment gross profit
|
|
$
|
188,730
|
|
|
$
|
—
|
|
|
$
|
386,946
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
283,155
|
|
|
|
—
|
|
|
|
1,102,675
|
|
|
|
—
|
|
Segment
operating loss
|
|
$
|
(94,425
|
)
|
|
$
|
—
|
|
|
$
|
(715,729
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verification and
certification segment
|
|
$
|
10,409,289
|
|
|
$
|
9,442,909
|
|
|
$
|
10,409,289
|
|
|
$
|
9,442,909
|
|
Software
and related consulting segment
|
|
|
4,443,117
|
|
|
|
—
|
|
|
|
4,443,117
|
|
|
|
—
|
|
Consolidated
Assets
|
|
$
|
14,852,406
|
|
|
$
|
9,442,909
|
|
|
$
|
14,852,406
|
|
|
$
|
9,442,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verification and
certification segment
|
|
$
|
4,359,822
|
|
|
$
|
3,344,246
|
|
|
$
|
10,378,661
|
|
|
$
|
8,589,599
|
|
Software
and related consulting segment
|
|
|
374,613
|
|
|
|
—
|
|
|
|
931,804
|
|
|
|
—
|
|
Consolidated
Revenues:
|
|
$
|
4,734,435
|
|
|
$
|
3,344,246
|
|
|
$
|
11,310,465
|
|
|
$
|
8,589,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verification and
certification segment
|
|
$
|
2,102,606
|
|
|
$
|
1,601,444
|
|
|
$
|
4,957,215
|
|
|
$
|
4,126,138
|
|
Software
and related consulting segment
|
|
|
188,730
|
|
|
|
—
|
|
|
|
386,946
|
|
|
|
—
|
|
Consolidated
Gross Profit:
|
|
$
|
2,291,336
|
|
|
$
|
1,601,444
|
|
|
$
|
5,344,161
|
|
|
$
|
4,126,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verification and
certification segment
|
|
$
|
1,558,442
|
|
|
$
|
1,239,834
|
|
|
$
|
3,920,771
|
|
|
$
|
3,412,211
|
|
Software
and related consulting segment
|
|
|
283,155
|
|
|
|
—
|
|
|
|
1,102,675
|
|
|
|
—
|
|
Consolidated
Selling, General and Administrative Expenses:
|
|
$
|
1,841,597
|
|
|
$
|
1,239,834
|
|
|
$
|
5,023,446
|
|
|
$
|
3,412,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verification and
certification segment
|
|
$
|
544,164
|
|
|
$
|
361,610
|
|
|
$
|
1,036,444
|
|
|
$
|
713,927
|
|
Software
and related consulting segment
|
|
|
(94,425
|
)
|
|
|
—
|
|
|
|
(715,729
|
)
|
|
|
—
|
|
Consolidated
Income from Operations:
|
|
$
|
449,739
|
|
|
$
|
361,610
|
|
|
$
|
320,715
|
|
|
$
|
713,927
|
|
Where
Food Comes From, Inc.
Notes
to the Consolidated Financial Statements
(Unaudited)
Note
11 – Supplemental Cash Flow Information
|
|
Year
to date ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
603
|
|
|
$
|
876
|
|
Income
taxes
|
|
$
|
184,440
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Common
stock issued for remaining interest in Validus Verification Services LLC
|
|
$
|
—
|
|
|
$
|
200,100
|
|
Equipment
acquired under a capital lease
|
|
$
|
18,033
|
|
|
$
|
22,439
|
|
Vehicle
acquired under note payable
|
|
$
|
54,165
|
|
|
$
|
—
|
|
Lease
incentive obligation
|
|
$
|
—
|
|
|
$
|
162,540
|
|
Common
stock issued in acquisition of A Bee Organic
|
|
$
|
98,221
|
|
|
$
|
—
|
|
Common
stock issued for acquisition-related consulting fess
|
|
$
|
25,000
|
|
|
$
|
—
|
|