10-Q

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 March 31, 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 6^th 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 May 1, 2020, was 24,908,032.

Where Food Comes From, Inc.

Table of Contents

March 31, 2020

Part 1 - Financial Information
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 4.	Controls and Procedures	22
Part II - Other Information
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6.	Exhibits	23

2

Where Food Comes From, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)	March 31, 2020			December 31,   2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,964		$	2,638
Accounts receivable, net of allowance		1,972			2,515
Short-term investments in certificates of deposit		259			258
Prepaid expenses and other current assets		289			450
Total current assets		5,484			5,861
Property and equipment, net		1,575			1,545
Operating lease right-of-use assets		3,204			3,268
Investment in Progressive Beef		991			991
Intangible and other assets, net		3,410			3,248
Goodwill		2,946			2,946
Deferred tax assets, net		383			378
Total assets	$	17,993		$	18,237
Liabilities and Equity
Current liabilities:
Accounts payable	$	681		$	1,023
Accrued expenses and other current liabilities		583			674
Deferred revenue		1,413			797
Current portion of finance lease obligations		9			8
Current portion of operating lease obligations		247			239
Total current liabilities		2,933			2,741
Finance lease obligations, net of current portion		19			21
Operating lease obligation, net of current portion		3,460			3,526
Total liabilities		6,412			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; 25,802 shares issued, and 24,893 (2020) and  24,977 (2019) shares outstanding		26			26
Additional paid-in-capital		11,456			11,425
Treasury stock of 909 (2020) and 825 (2019) shares		(1,823	)		(1,665	)
Retained earnings		1,922			2,163
Total equity		11,581			11,949
Total liabilities and stockholders’ equity	$	17,993		$	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 March 31,
(Amounts in thousands, except per share amounts)		2020			2019
Revenues:
Verification and certification service revenue	$	2,803		$	2,812
Product sales		725			641
Software license, maintenance and support services revenue		143			295
Software-related consulting service revenue		241			207
Total revenues		3,912			3,955
Costs of revenues:
Costs of verification and certification services		1,534			1,562
Costs of products		502			443
Costs of software license, maintenance and support services		146			154
Costs of software-related consulting services		120			130
Total costs of revenues		2,302			2,289
Gross profit		1,610			1,666
Selling, general and administrative expenses		1,964			1,967
(Loss)/income from operations		(354	)		(301	)
Other expense (income):
Dividend income from Progressive Beef		(30	)		(30	)
Other income, net		(2	)		(3	)
Gain on sale of assets		-			(1	)
Gain on foreign currency exchange		(3	)		-
Interest expense		2			3
(Loss)/income before income taxes		(321	)		(270	)
Income tax (benefit)/expense		(80	)		(83	)
Net (loss)/income		(241	)		(187	)
Net loss attributable to non-controlling interest		-			44
Net (loss)/income attributable to Where Food Comes From, Inc.	$	(241	)	$	(143	)
Per share - net (loss)/income attributable to Where Food Comes From, Inc.:
Basic	$	*		$	*
Diluted	$	*		$	*
Weighted average number of common shares outstanding:
Basic		24,947			24,957
Diluted		24,947			24,957
* less than $0.01 per share

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

4

Where Food Comes From, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Three months ended March 31,
(Amounts in thousands)	2020			2019
Operating activities:
Net (loss)/income	$	(241	)	$	(187	)
Adjustments to reconcile net loss to net cash  provided by operating activities:
Depreciation and amortization		233			260
Gain on sale of assets		-			(1	)
Stock-based compensation expense		31			45
Deferred tax benefit		(5	)		(28	)
Changes in operating assets and liabilities,  net of effect from acquisitions:
Accounts receivable		543			199
Short-term investments		(1	)		(2	)
Prepaid expenses and other assets		161			11
Accounts payable		(342	)		158
Accrued expenses and other current liabilities		(91	)		148
Deferred revenue		616			635
Right of use assets and liabilities, net		(8	)		13
Net cash provided by operating activities		896			1,251
Investing activities:
Acquisition of Postelsia Holdings, Ltd.		(300	)		-
Proceeds from sale of assets		-			1
Purchases of property, equipment and software development costs		(110	)		(196	)
Net cash used in investing activities		(410	)		(195	)
Financing activities:
Repayments of notes payable		-			(2	)
Repayments of finance lease obligations		(2	)		(1	)
Stock repurchase under Stock Buyback Plan		(158	)		(83	)
Net cash used in financing activities		(160	)		(86	)
Net change in cash		326			970
Cash at beginning of period		2,638			1,482
Cash at end of period	$	2,964		$	2,452

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

5

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, 2018		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 loss attributable to Where Food Comes From, Inc.		-			-		-		-			(143	)		(143	)
Balance at March 31, 2019		24,921		$	25	$	11,076	$	(1,192	)	$	675		$	10,584
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

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

6

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 Verifications Services, LLC (“Validus”), Sterling Solutions (“Sterling”), SureHarvest Services, Inc. (“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 loss 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 months ended March 31, 2020 are not necessarily indicative of the results to be expected for any other interim period of any future year.

7

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 for six months following the closing date. The escrowed funds are to support any claims by the Company for breaches of representation and warranties.

Postelsia, based in Victoria, British Columbia, is a leader in the emerging field of environmental and social sustainability programs for the seafood industry. Postelsia provides a range of programs and consulting services designed to improve and promote sustainable practices, including environmental conservation, worker care, and food safety compliance. Postelsia will operate as a wholly owned subsidiary of the Company.

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.

8

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 3 – Basic and Diluted Net Loss 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 loss per share computations (amounts in thousands):

	Three months ended March 31,
	2020		2019
Basic:
Weighted average shares outstanding		24,947		24,957
Diluted:
Weighted average shares outstanding		24,947		24,957
Weighted average effects of dilutive securities		-		-
Total		24,947		24,957
Antidilutive securities:		206		266

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.

Note 4 - Investment in Progressive Beef, LLC

For the three months ended March 31, 2020 and March 31, 2019, the Company received dividend income from Progressive Beef of $30,000 representing a distribution of their earnings. The income is reflected within the “other (expense) income” section of the Company’s Consolidated Statement of Income for the three months ended March 31, 2020 and March 31, 2019. The Company completed a qualitative assessment and determined that there were no impairment indicators as of March 31, 2020.

9

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):

	March 31,		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		2,333		2,182
		2,924		2,762
Tradenames/trademarks (not subject to amortization)		465		465
		3,389		3,227
Other assets		21		21
Intangible and other assets:	$	3,410	$	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):

	March 31,		December 31,
	2020		2019
Income and sales taxes payable	$	97	$	171
Payroll related accruals		218		201
Customer deposits		90		62
Professional fees and other expenses		178		240
	$	583	$	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 March 31, 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 March 31, 2020, and December 31, 2019, there were no amounts outstanding under this LOC.

10

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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 March 31,
	2020		2019
Stock options	$	30	$	39
Restricted stock awards		1		6
Total	$	31	$	45

During the three months ended March 31, 2020, the Company awarded stock options to purchase 20,000 shares of the Company’s common stock at an exercise price of $1.81 per share to employees of the Company. No stock options were awarded during the three months ended March 31, 2019.

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

	Three months ended March 31,
	2020			2019
Number of options awarded to purchase common shares		20,000			None
Risk-free interest rate		1.56	%		N/A
Expected volatility		97.0	%		N/A
Assumed dividend yield		N/A			N/A
Expected life of options from the date of grant		9.9 years			N/A

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 nine months)	$	94	$	3	$	97
2021		83		1		84
2022		16		-		16
2023		1		-		1
	$	194	$	4	$	198

11

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Equity Incentive Plans

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

Stock Option Activity

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

							Weighted avg.
			Weighted avg.		Weighted avg.		remaining
	Number of		exercise price		grant date fair		contractual life		Aggregate
	awards		per share		value per share		(in years)		intrinsic value
Outstanding, December 31, 2019		437,126	$	1.46	$	1.49		5.97	$	150,417
Granted		20,000	$	1.81	$	2.05		9.90
Exercised		-	$	-	$	-		-
Expired/Forfeited		-	$	-	$	-		-
Outstanding, March 31, 2020		457,126	$	1.48	$	1.52		5.82	$	178,795
Exercisable, March 31, 2020		318,812	$	1.34	$	1.36		4.67	$	172,704
Unvested, March 31, 2020		138,314	$	1.78	$	1.88		8.76	$	6,091

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on March 31, 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 March 31, 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, March 31, 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.

12

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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 March 31, 2020 we recorded an income tax benefit of approximately $80,000, compared to income tax benefit of $83,000 for the same 2019 period.

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 March 31, 2020									Three months ended March 31, 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
Revenues:
Verification and certification service revenue	$	2,803	$	-	$	-		$	2,803	$	2,812	$	-	$	-		$	2,812
Product sales		725		-		-			725		641		-		-			641
Software license, maintenance and support services revenue		-		233		(90	)		143		-		344		(49	)		295
Software-related consulting service revenue		-		265		(24	)		241		-		221		(14	)		207
Total revenues	$	3,528	$	498	$	(114	)	$	3,912	$	3,453	$	565	$	(63	)	$	3,955

Contract Balances

As of March 31, 2020, and December 31, 2019, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $2.0 and $2.5 million, respectively.

As of March 31, 2020, and December 31, 2019, deferred revenue from contracts with customers was approximately $1.4 and $0.8 million, respectively. The balance of the contract liabilities at March 31, 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 March 31, 2020 (amounts in thousands):

Deferred revenue:
Unearned revenue January 1, 2020	$	797
Unearned billings		1,235
Revenue recognized		(619	)
Unearned revenue March 31, 2020	$	1,413

13

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
	March 31, 2020		March 31, 2019
Operating lease cost	$	116	$	120
Finance lease cost
Amortization of assets		2		2
Interest on finance lease obligations		1		2
Total net lease cost	$	119	$	124

Included in the table above, is $92,000 for the three months ended March 31, 2020, 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):

	March 31, 2020						December 31, 2019
Operating leases:	Related Party		Other		Total		Related Party		Other		Total
Operating lease ROU assets	$	2,889	$	296	$	3,185	$	2,933	$	314	$	3,247
Current operating lease liabilities	$	164	$	83	$	247	$	158	$	81	$	239
Noncurrent operating lease liabilities		3,216		244		3,460		3,260		266		3,526
Total operating lease liabilities	$	3,380	$	327	$	3,707	$	3,418	$	347	$	3,765

	March 31, 2020			December 31, 2019
Finance leases:
Property and equipment, at cost	$	43		$	43
Accumulated amortization		(24	)		(22	)
Property and equipment, net	$	19		$	21
Current obligations of finance leases	$	9		$	8
Finance leases, net of current obligations		19			21
Total finance lease liabilities	$	28		$	29
Weighted average remaining lease term (in years):
Operating leases		10.7			11.0
Finance leases		2.8			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
	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	111	$	100
Operating cash flows from finance leases	$	1	$	2
Financing cash flows from finance leases	$	2	$	1
ROU assets obtained in exchange for lease liabilities:
Operating leases	$	3,507	$	3,513

14

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 (nine remaining months)	$	338		$	10
2021		462			12
2022		466			10
2023		461			5
2024		407			-
Thereafter		2,901			-
Total lease payments		5,035			37
Less amount representing interest		(1,328	)		(9	)
Total lease obligations		3,707			28
Less current portion		(247	)		(9	)
Long-term lease obligations	$	3,460		$	19

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, and Validus. The factors considered in determining this aggregated reporting segment include the economic similarity of the businesses, the nature of services provided, production processes, types of customers and distribution methods.

The Company also determined that it has a software sales and related consulting reportable segment. SureHarvest, which includes Sow Organic and JVF Consulting, is the sole operating segment. This segment includes software license, maintenance, support and software-related consulting service revenues.

The Company’s chief operating decision maker (the Company’s CEO) allocates resources and assesses the performance of its operating segments. Segment management makes decisions, measures performance, and manages the business utilizing internal reporting operating segment information. Performance of operating segments are based on net sales, gross profit, selling, general and administrative expenses and most importantly, operating income.

15

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 March 31, 2020												Three months ended March 31, 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	$	1,266		$	2,144		$	-		$	3,410		$	1,425		$	2,273		$	-		$	3,698
Goodwill		1,133			1,813			-			2,946			1,133			2,011			-			3,144
Total assets		16,999			5,524			(4,530	)		17,993			13,031			5,518			-			18,549
Revenues:
Verification and certification service revenue	$	2,803		$	-		$	-		$	2,803		$	2,812		$	-		$	-		$	2,812
Product sales		725			-			-			725			641			-			-			641
Software license, maintenance and support services revenue		-			233			(90	)		143			-			344			(49	)		295
Software-related consulting service revenue		-			265			(24	)		241			-			221			(14	)		207
Total revenues	$	3,528		$	498		$	(114	)	$	3,912		$	3,453		$	565		$	(63	)	$	3,955
Costs of revenues:
Costs of verification and certification services		1,624			-			(90	)		1,534			1,595			-			(33	)		1,562
Costs of products		502			-			-			502			443			-			-			443
Costs of software license, maintenance and support services		-			146			-			146			-			154			-			154
Costs of software-related consulting services		-			120			-			120			-			130			-			130
Total costs of revenues		2,126			266			(90	)		2,302			2,038			284			(33	)		2,289
Gross profit		1,402			232			(24	)		1,610			1,415			281			(30	)		1,666
Depreciation & amortization		88			146			-			234			82			178			-			260
Other operating expenses		1,537			217			(24	)		1,730			1,511			226			(30	)		1,707
Segment operating (loss)/income	$	(223	)	$	(131	)	$	-		$	(354	)	$	(178	)	$	(123	)	$	-		$	(301	)
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:
Other expense (income)		(30	)		(3	)		-			(33	)		-			-			(31	)		(31	)
Income tax (benefit)/expense		-			-			(80	)		(80	)		-			-			(83	)		(83	)
Net loss attributable to non-controlling interest		-			-			-			-			-			44			-			44
Net (loss)/income attributable to WFCF	$	(193	)	$	(128	)	$	80		$	(241	)	$	(178	)	$	(79	)	$	114		$	(143	)

Note 14 – Supplemental Cash Flow Information

	Three months ended March 31,
(Amounts in thousands)	2020		2019
Cash paid during the year:
Interest expense	$	2	$	3
Income taxes	$	-	$	-

Note 15 – Subsequent Events

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. The Company has not received any notification if any of the loan amount will be forgiven.

16

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; Sow Organic, LLC; JVF Consulting, 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.

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 working remotely. Company management continues to evaluate when employees will return to their respective offices, on a state by state and department by department basis. The health of our employees is a key concern for the Company. The Company will continue to maintain standard business operations by having a majority of its 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.

17

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 March 31, 2020, we had cash, cash equivalents and certificates of deposits (classified as short-term and long-term investments) of approximately $3.2 million compared to approximately $2.9 million at December 31, 2019. Our working capital at March 31, 2020 was approximately $2.6 million compared to $3.1 million at December 31, 2019.

Net cash provided by operating activities for the three months ended March 31, 2020 was approximately $0.9 million compared to net cash provided of $1.3 million during the same period in 2019. Net cash provided by operating activities is driven by our net loss 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 and accounts payable as of March 31, 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 impaired at this time, but will keep actively monitoring the customer receivables.

Net cash used in investing activities for the three months ended March 31, 2020, was approximately $0.4 million compared to cash used in investing activities of $0.2 million used in the 2019 period. Net cash used in the March 31, 2020 period was primarily attributable to acquisition of Postelsia Holdings, Ltd for $0.3 million.

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.

The culmination of all our efforts has brought significant opportunities to us, including increased investor confidence and renewed interest in our company, as well as the potential to develop business relationships with long-term strategic partners. 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 March 31, 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 March 31, 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. The Company has not received any notification if any of the loan amount will be forgiven.

Off-Balance Sheet Arrangements

As of March 31, 2020, we had no off-balance sheet arrangements of any type.

18

RESULTS OF OPERATIONS

Three months ended March 31, 2020 compared to the same period in fiscal year 2019

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

	Three months ended March 31, 2020												Three months ended March 31, 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	$	1,266		$	2,144		$	-		$	3,410		$	1,425		$	2,273		$	-		$	3,698
Goodwill		1,133			1,813			-			2,946			1,133			2,011			-			3,144
Total assets		16,999			5,524			(4,530	)		17,993			13,031			5,518			-			18,549
Revenues:
Verification and certification service revenue	$	2,803		$	-		$	-		$	2,803		$	2,812		$	-		$	-		$	2,812
Product sales		725			-			-			725			641			-			-			641
Software license, maintenance and support services revenue		-			233			(90	)		143			-			344			(49	)		295
Software-related consulting service revenue		-			265			(24	)		241			-			221			(14	)		207
Total revenues	$	3,528		$	498		$	(114	)	$	3,912		$	3,453		$	565		$	(63	)	$	3,955
Costs of revenues:
Costs of verification and certification services		1,624			-			(90	)		1,534			1,595			-			(33	)		1,562
Costs of products		502			-			-			502			443			-			-			443
Costs of software license, maintenance and support services		-			146			-			146			-			154			-			154
Costs of software-related consulting services		-			120			-			120			-			130			-			130
Total costs of revenues		2,126			266			(90	)		2,302			2,038			284			(33	)		2,289
Gross profit		1,402			232			(24	)		1,610			1,415			281			(30	)		1,666
Depreciation & amortization		88			146			-			234			82			178			-			260
Other operating expenses		1,537			217			(24	)		1,730			1,511			226			(30	)		1,707
Segment operating (loss)/income	$	(223	)	$	(131	)	$	-		$	(354	)	$	(178	)	$	(123	)	$	-		$	(301	)
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:
Other expense (income)		(30	)		(3	)		-			(33	)		-			-			(31	)		(31	)
Income tax (benefit)/expense		-			-			(80	)		(80	)		-			-			(83	)		(83	)
Net loss attributable to non-controlling interest		-			-			-			-			-			44			-			44
Net (loss)/income attributable to WFCF	$	(193	)	$	(128	)	$	80		$	(241	)	$	(178	)	$	(79	)	$	114		$	(143	)

19

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 months ended March 31, 2020 decreased less than 0.4% compared to 2019.

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 months ended March 31, 2020 increased approximately $0.1 million, or 13.1% 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 months ended March 31, 2020 were approximately $1.5 million compared to approximately $1.6 million for the same period in 2019. Gross margin for the three months ended March 31, 2020 decreased to 39.7% compared to 41.0% in 2019 primarily due to competitive pricing offered to dairy calf ranches for significantly higher purchase volumes of cattle identification ear tags. 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 months ended March 31, 2020 increased approximately 1.7% compared to the same three month period in 2019.

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, JVF Consulting 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 months ended March 31, 2020, software license, maintenance and support services revenue decreased approximately 32.3% over 2019 predominately due to a significant 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 months ended March 31, 2020 increased approximately 19.9% compared to the same period in 2019. The three month increase is due to fluctuations in customer demand for consulting services.

Costs of revenues for our software sales and related consulting segment for the three months ended March 31, 2020 and March 31, 2019 was approximately $0.3 million. Gross margin for the three months ended March 31, 2020 declined to 46.6% compared to 49.7% for the same period in 2019. The three 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 months ended March 31, 2020 decreased approximately 4.0% compared to the same period in 2019. The decrease is predominately due to managing general expenses.

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.

20

Dividend Income from Progressive Beef

For the three months ended March 31, 2020 and March 31, 2019, the Company received dividend income of $30,000 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 months ended March 31, 2020, we recorded income tax benefit of approximately $80,000 compared to income tax benefit of $83,000 for the same period in 2019.

Net Income and Per Share Information

As a result of the foregoing, net loss attributable to WFCF shareholders for the three months ended March 31, 2020 was approximately $0.2 million and less than a penny per basic and diluted common share, respectively, compared to net loss of approximately $0.1 million and less than a penny per basic and diluted common share for the same period in 2019.

21

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.

22

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 March 31, 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 March 31, 2020 is as follows:

	Number of Shares		Cost of Shares		Average Cost per Share
Shares purchased - January 2020		19,295	$	36,382	$	1.89
Shares purchased - February 2020		7,890		15,226	$	1.93
Shares purchased - March 2020		57,040		107,085	$	1.88
Total		84,225	$	158,693	$	1.88

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

23

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: May 14, 2020	Where Food Comes From, Inc.
	By:	/s/ John K. Saunders
		Chief Executive Officer
	By:	/s/ Dannette Henning
		Chief Financial Officer

24

EX-31.1

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: May 14, 2020

/s/ John Saunders

John Saunders, Chief Executive Officer

EX-31.2

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: May 14, 2020

/s/ Dannette Henning

Dannette Henning, Chief Financial Officer

EX-32.1

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 March 31, 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: May 14, 2020

/s/ John Saunders

John Saunders, Chief Executive Officer

EX-32.2

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 March 31, 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: May 14, 2020

/s/ Dannette Henning

Dannette Henning, Chief Financial Officer

XML

Basic and Diluted Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Per share - net (loss)/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 loss per share computations (amounts in thousands):

	Three months ended March 31,
	2020		2019
Basic:
Weighted average shares outstanding		24,947		24,957
Diluted:
Weighted average shares outstanding		24,947		24,957
Weighted average effects of dilutive securities		-		-
Total		24,947		24,957
Antidilutive securities:		206		266

XML

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 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 March 31, 2020									Three months ended March 31, 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
Revenues:
Verification and certification service revenue	$	2,803	$	-	$	-		$	2,803	$	2,812	$	-	$	-		$	2,812
Product sales		725		-		-			725		641		-		-			641
Software license, maintenance and support services revenue		-		233		(90	)		143		-		344		(49	)		295
Software-related consulting service revenue		-		265		(24	)		241		-		221		(14	)		207
Total revenues	$	3,528	$	498	$	(114	)	$	3,912	$	3,453	$	565	$	(63	)	$	3,955

Schedule of Changes in Contract Liabilities

The following table reflects the changes in our contract liabilities during the three month period ended March 31, 2020 (amounts in thousands):

Deferred revenue:
Unearned revenue January 1, 2020	$	797
Unearned billings		1,235
Revenue recognized		(619	)
Unearned revenue March 31, 2020	$	1,413

XML

Revenue Recognition - Schedule of Changes in Contract Liabilities (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Revenue from Contract with Customer [Abstract]
Unearned revenue, Begining balance	$ 797
Unearned billings	1,235
Revenue recognized	(619)
Unearned revenue, Ending balance	$ 1,413

XML

Stock-Based Compensation - Schedule of Restricted Stock Activity Under Equity Incentive Plan (Details)	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of restricted stock options, Beginning Balance | shares	5,000
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
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

XML

Segments - Schedule of Operating Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Segment Reporting Information [Line Items]
Goodwill	$ 2,946		$ 2,946
Total assets	17,993		$ 18,237
Total revenues	3,912	$ 3,955
Total costs of revenues	2,302	2,289
Gross profit	1,610	1,666
Depreciation & amortization	233	260
Segment operating (loss)/income	(354)	(301)
Income tax (benefit)/expense	(80)	(83)
Net loss attributable to non-controlling interest		44
Net (loss)/income attributable to WFCF	(241)	(143)
Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	3,528	3,453
Total costs of revenues	2,126	2,038
Gross profit	1,402	1,415
Depreciation & amortization	88	82
Other operating expenses	1,537	1,511
Segment operating (loss)/income	(223)	(178)
Other expense (income)	(30)
Income tax (benefit)/expense
Net loss attributable to non-controlling interest
Net (loss)/income attributable to WFCF	(193)	(178)
Product Sales [Member]
Segment Reporting Information [Line Items]
Total revenues	498	565
Total costs of revenues	266	284
Gross profit	232	281
Depreciation & amortization	146	178
Other operating expenses	217	226
Segment operating (loss)/income	(131)	(123)
Other expense (income)	(3)
Income tax (benefit)/expense
Net loss attributable to non-controlling interest		44
Net (loss)/income attributable to WFCF	(128)	(79)
Software License, Maintenance and Support Services Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	(114)	(63)
Total costs of revenues	90	33
Gross profit	(24)	(30)
Depreciation & amortization
Other operating expenses	(24)	(30)
Segment operating (loss)/income
Other expense (income)		(31)
Income tax (benefit)/expense	(80)	(83)
Net loss attributable to non-controlling interest
Net (loss)/income attributable to WFCF	80	114
Software-Related Consulting Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	3,912	3,955
Total costs of revenues	2,302	2,289
Gross profit	1,610	1,666
Depreciation & amortization	234	260
Other operating expenses	1,730	1,707
Segment operating (loss)/income	(354)	(301)
Other expense (income)	(33)	(31)
Income tax (benefit)/expense	(80)	(83)
Net loss attributable to non-controlling interest		44
Net (loss)/income attributable to WFCF	(241)	(143)
Verification and Certification Segment [Member]
Segment Reporting Information [Line Items]
Intangible and other assets, net	1,266	1,425
Goodwill	1,133	1,133
Total assets	16,999	13,031
Total revenues	3,528	3,453
Verification and Certification Segment [Member] | Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	2,803	2,812
Total costs of revenues	1,624	1,595
Verification and Certification Segment [Member] | Product Sales [Member]
Segment Reporting Information [Line Items]
Total revenues	725	641
Total costs of revenues	502	443
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	2,144	2,273
Goodwill	1,813	2,011
Total assets	5,524	5,518
Total revenues	498	565
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	233	344
Total costs of revenues	146	154
Software Sales and Related Consulting Segment [Member] | Software-Related Consulting Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	265	221
Total costs of revenues	120	130
Eliminations and Other [Member]
Segment Reporting Information [Line Items]
Intangible and other assets, net
Goodwill
Total assets	(4,530)
Total revenues	(114)	(63)
Eliminations and Other [Member] | Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues
Total costs of revenues	(90)	(33)
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	(90)	(49)
Total costs of revenues
Eliminations and Other [Member] | Software-Related Consulting Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	(24)	(14)
Total costs of revenues		(33)
Consolidated [Member]
Segment Reporting Information [Line Items]
Intangible and other assets, net	3,410	3,698
Goodwill	2,946	3,144
Total assets	17,993	18,549
Total revenues	3,912	3,955
Consolidated [Member] | Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	2,803	2,812
Total costs of revenues	1,534	1,562
Consolidated [Member] | Product Sales [Member]
Segment Reporting Information [Line Items]
Total revenues	725	641
Total costs of revenues	502	443
Consolidated [Member] | Software License, Maintenance and Support Services Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	143	295
Total costs of revenues	146	154
Consolidated [Member] | Software-Related Consulting Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	241	207
Total costs of revenues	$ 120	$ 130

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 2,964	$ 2,638
Accounts receivable, net of allowance	1,972	2,515
Short-term investments in certificates of deposit	259	258
Prepaid expenses and other current assets	289	450
Total current assets	5,484	5,861
Property and equipment, net	1,575	1,545
Operating lease right-of-use assets	3,204	3,268
Investment in Progressive Beef	991	991
Intangible and other assets, net	3,410	3,248
Goodwill	2,946	2,946
Deferred tax assets, net	383	378
Total assets	17,993	18,237
Current liabilities:
Accounts payable	681	1,023
Accrued expenses and other current liabilities	583	674
Deferred revenue	1,413	797
Current portion of finance lease obligations	9	8
Current portion of operating lease obligations	247	239
Total current liabilities	2,933	2,741
Finance lease obligations, net of current portion	19	21
Operating lease obligation, net of current portion	3,460	3,526
Total liabilities	6,412	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; 25,802 shares issued, and 24,893 (2020) and 24,977 (2019) shares outstanding	26	26
Additional paid-in-capital	11,456	11,425
Treasury stock of 909 (2020) and 825 (2019) shares	(1,823)	(1,665)
Retained earnings	1,922	2,163
Total equity	11,581	11,949
Total liabilities and stockholders' equity	$ 17,993	$ 18,237

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating activities:
Net (loss)/income	$ (241)	$ (187)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	233	260
Gain on sale of assets		(1)
Stock-based compensation expense	31	45
Deferred tax benefit	(5)	(28)
Changes in operating assets and liabilities, net of effect from acquisitions:
Accounts receivable	543	199
Short-term investments	(1)	(2)
Prepaid expenses and other assets	161	11
Accounts payable	(342)	158
Accrued expenses and other current liabilities	(91)	148
Deferred revenue	616	635
Right of use assets and liabilities, net	(8)	13
Net cash provided by operating activities	896	1,251
Investing activities:
Acquisition of Postelsia Holdings, Ltd.	(300)
Proceeds from sale of assets		1
Purchases of property, equipment and software development costs	(110)	(196)
Net cash used in investing activities	(410)	(195)
Financing activities:
Repayments of notes payable		(2)
Repayments of finance lease obligations	(2)	(1)
Stock repurchase under Stock Buyback Plan	(158)	(83)
Net cash used in financing activities	(160)	(86)
Net change in cash	326	970
Cash at beginning of period	2,638	1,482
Cash at end of period	$ 2,964	$ 2,452

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 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.

XML

Investment in Progressive Beef, LLC

3 Months Ended

Mar. 31, 2020

Investments, All Other Investments [Abstract]

Investment in Progressive Beef, LLC

Note 4 - Investment in Progressive Beef, LLC

For the three months ended March 31, 2020 and March 31, 2019, the Company received dividend income from Progressive Beef of $30,000 representing a distribution of their earnings. The income is reflected within the “other (expense) income” section of the Company’s Consolidated Statement of Income for the three months ended March 31, 2020 and March 31, 2019. The Company completed a qualitative assessment and determined that there were no impairment indicators as of March 31, 2020.

XML

Stock-Based Compensation

3 Months Ended

Mar. 31, 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 March 31,
	2020		2019
Stock options	$	30	$	39
Restricted stock awards		1		6
Total	$	31	$	45

During the three months ended March 31, 2020, the Company awarded stock options to purchase 20,000 shares of the Company’s common stock at an exercise price of $1.81 per share to employees of the Company. No stock options were awarded during the three months ended March 31, 2019.

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

	Three months ended March 31,
	2020			2019
Number of options awarded to purchase common shares		20,000			None
Risk-free interest rate		1.56	%		N/A
Expected volatility		97.0	%		N/A
Assumed dividend yield		N/A			N/A
Expected life of options from the date of grant		9.9 years			N/A

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 nine months)	$	94	$	3	$	97
2021		83		1		84
2022		16		-		16
2023		1		-		1
	$	194	$	4	$	198

Equity Incentive Plans

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

Stock Option Activity

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

							Weighted avg.
			Weighted avg.		Weighted avg.		remaining
	Number of		exercise price		grant date fair		contractual life		Aggregate
	awards		per share		value per share		(in years)		intrinsic value
Outstanding, December 31, 2019		437,126	$	1.46	$	1.49		5.97	$	150,417
Granted		20,000	$	1.81	$	2.05		9.90
Exercised		-	$	-	$	-		-
Expired/Forfeited		-	$	-	$	-		-
Outstanding, March 31, 2020		457,126	$	1.48	$	1.52		5.82	$	178,795
Exercisable, March 31, 2020		318,812	$	1.34	$	1.36		4.67	$	172,704
Unvested, March 31, 2020		138,314	$	1.78	$	1.88		8.76	$	6,091

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on March 31, 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 March 31, 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, March 31, 2020		5,000	$	2.55

XML

Notes Payable (Details Narrative) - Revolving Line of Credit [Member] - USD ($)	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
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%

XML

Basic and Diluted Net Loss Per Share - Schedule of Reconciliation of Basic and Diluted Income Per Share Computations (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Per share - net (loss)/income attributable to Where Food Comes From, Inc.:
Weighted average shares outstanding: Basic	24,947,000	24,957,000
Weighted average shares outstanding: Diluted	24,947,000	24,957,000
Weighted average effects of dilutive securities
Total	24,947,000	24,957,000
Antidilutive securities	206,000	266,000

XML

Segments (Details Narrative)	3 Months Ended
	Mar. 31, 2020 Integer
Segment Reporting [Abstract]
Number of operating segment	1

XML

Basic and Diluted Net Loss Per Share

3 Months Ended

Mar. 31, 2020

Per share - net (loss)/income attributable to Where Food Comes From, Inc.:

Basic and Diluted Net Loss Per Share

Note 3 – Basic and Diluted Net Loss 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 loss per share computations (amounts in thousands):

	Three months ended March 31,
	2020		2019
Basic:
Weighted average shares outstanding		24,947		24,957
Diluted:
Weighted average shares outstanding		24,947		24,957
Weighted average effects of dilutive securities		-		-
Total		24,947		24,957
Antidilutive securities:		206		266

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.

XML

Notes Payable

3 Months Ended

Mar. 31, 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 March 31, 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 March 31, 2020, and December 31, 2019, there were no amounts outstanding under this LOC.

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 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	25,802,000	25,802,000
Common stock, outstanding	24,893,000	24,977,000
Treasury stock	909,000	825,000

XML

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	24,968,000
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	(47,000)
Net 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	24,921,000
Balance at beginning at Dec. 31, 2019	$ 26	11,425	(1,665)	2,163	11,949
Balance at beginning, shares at Dec. 31, 2019	24,977,000
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	(84,000)
Net 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	24,893,000

XML

Leases

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Leases

Note 11 – Leases

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

	Three months ended
	March 31, 2020		March 31, 2019
Operating lease cost	$	116	$	120
Finance lease cost
Amortization of assets		2		2
Interest on finance lease obligations		1		2
Total net lease cost	$	119	$	124

Included in the table above, is $92,000 for the three months ended March 31, 2020, 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):

	March 31, 2020						December 31, 2019
Operating leases:	Related Party		Other		Total		Related Party		Other		Total
Operating lease ROU assets	$	2,889	$	296	$	3,185	$	2,933	$	314	$	3,247
Current operating lease liabilities	$	164	$	83	$	247	$	158	$	81	$	239
Noncurrent operating lease liabilities		3,216		244		3,460		3,260		266		3,526
Total operating lease liabilities	$	3,380	$	327	$	3,707	$	3,418	$	347	$	3,765

	March 31, 2020			December 31, 2019
Finance leases:
Property and equipment, at cost	$	43		$	43
Accumulated amortization		(24	)		(22	)
Property and equipment, net	$	19		$	21
Current obligations of finance leases	$	9		$	8
Finance leases, net of current obligations		19			21
Total finance lease liabilities	$	28		$	29
Weighted average remaining lease term (in years):
Operating leases		10.7			11.0
Finance leases		2.8			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
	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	111	$	100
Operating cash flows from finance leases	$	1	$	2
Financing cash flows from finance leases	$	2	$	1
ROU assets obtained in exchange for lease liabilities:
Operating leases	$	3,507	$	3,513

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

Years Ending December 31st,	Operating Leases			Finance Leases
2020 (nine remaining months)	$	338		$	10
2021		462			12
2022		466			10
2023		461			5
2024		407			-
Thereafter		2,901			-
Total lease payments		5,035			37
Less amount representing interest		(1,328	)		(9	)
Total lease obligations		3,707			28
Less current portion		(247	)		(9	)
Long-term lease obligations	$	3,460		$	19

XML

Stock-Based Compensation (Details Narrative) - Employees [Member] - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Number of awarded stock options to purchase	20
Stock options exercise price per share	$ 1.81

XML

Investment in Progressive Beef, LLC (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Dividend income	$ 30	$ 30
Progressive Beef, LLC [Member]
Dividend income	$ 30	$ 30

XML

Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Note 15 – Subsequent Events

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. The Company has not received any notification if any of the loan amount will be forgiven.

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 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 March 31,
	2020		2019
Stock options	$	30	$	39
Restricted stock awards		1		6
Total	$	31	$	45

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:

	Three months ended March 31,
	2020			2019
Number of options awarded to purchase common shares		20,000			None
Risk-free interest rate		1.56	%		N/A
Expected volatility		97.0	%		N/A
Assumed dividend yield		N/A			N/A
Expected life of options from the date of grant		9.9 years			N/A

Schedule of Unrecognized Compensation Cost from Unvested Awards

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

Years ended December 31st:	Unvested stock options		Unvested restricted stock awards		Total unrecognized compensation expense
2020 (remaining nine months)	$	94	$	3	$	97
2021		83		1		84
2022		16		-		16
2023		1		-		1
	$	194	$	4	$	198

Schedule of Stock Option Activity

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

							Weighted avg.
			Weighted avg.		Weighted avg.		remaining
	Number of		exercise price		grant date fair		contractual life		Aggregate
	awards		per share		value per share		(in years)		intrinsic value
Outstanding, December 31, 2019		437,126	$	1.46	$	1.49		5.97	$	150,417
Granted		20,000	$	1.81	$	2.05		9.90
Exercised		-	$	-	$	-		-
Expired/Forfeited		-	$	-	$	-		-
Outstanding, March 31, 2020		457,126	$	1.48	$	1.52		5.82	$	178,795
Exercisable, March 31, 2020		318,812	$	1.34	$	1.36		4.67	$	172,704
Unvested, March 31, 2020		138,314	$	1.78	$	1.88		8.76	$	6,091

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, March 31, 2020		5,000	$	2.55

XML

Leases (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating lease cost	$ 116	$ 120
The Move, LLC [Member]
Ownership interest	24.30%
Corporate Headquarters [Member]
Operating lease cost	$ 92

XML

Income Taxes (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Income tax benefit	$ 80	$ 83

XML

Leases - Schedule of Supplemental Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Lessee Disclosure [Abstract]
Operating cash flows from operating leases	$ 111	$ 100
Operating cash flows from finance leases	1	2
Financing cash flows from finance leases	2	1
ROU assets obtained in exchange for lease liabilities: Operating leases	$ 3,507	$ 3,513

XML

Supplemental Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Supplemental Cash Flow Information [Abstract]
Interest expense	$ 2	$ 2
Income taxes

XML

Accrued Expenses and Other Current Liabilities - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Income and sales taxes payable	$ 97	$ 171
Payroll related accruals	218	201
Customer deposits	90	62
Professional fees and other expenses	178	240
Accrued expenses and other current liabilities	$ 583	$ 674

XML

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

XML

Stock-Based Compensation - Schedule of Estimated Fair Value of Stock Options (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Payment Arrangement [Abstract]
Number of options awarded to purchase common shares	20,000
Risk-free interest rate	1.56%	0.00%
Expected volatility	97.00%	0.00%
Assumed dividend yield	0.00%	0.00%
Expected life of options from the date of grant	9 years 10 months 25 days	0 years

XML

Intangible and Other Assets

3 Months Ended

Mar. 31, 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):

	March 31,		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		2,333		2,182
		2,924		2,762
Tradenames/trademarks (not subject to amortization)		465		465
		3,389		3,227
Other assets		21		21
Intangible and other assets:	$	3,410	$	3,248

XML

Income Taxes

3 Months Ended

Mar. 31, 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 months ended March 31, 2020 we recorded an income tax benefit of approximately $80,000, compared to income tax benefit of $83,000 for the same 2019 period.

XML

Business Acquisitions

3 Months Ended

Mar. 31, 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 for six months following the closing date. The escrowed funds are to support any claims by the Company for breaches of representation and warranties.

Postelsia, based in Victoria, British Columbia, is a leader in the emerging field of environmental and social sustainability programs for the seafood industry. Postelsia provides a range of programs and consulting services designed to improve and promote sustainable practices, including environmental conservation, worker care, and food safety compliance. Postelsia will operate as a wholly owned subsidiary of the Company.

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.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 01, 2020
Document And Entity Information
Entity Registrant Name	Where Food Comes From, Inc.
Entity Central Index Key	0001360565
Document Type	10-Q
Document Period End Date	Mar. 31, 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		24,908,032
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

XML

Consolidated Statements of Operations (Parenthetical) - $ / shares	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Share price per share	$ 0.01	$ 0.01

XML

Leases (Tables)

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Schedule of Lease Expense

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

	Three months ended
	March 31, 2020		March 31, 2019
Operating lease cost	$	116	$	120
Finance lease cost
Amortization of assets		2		2
Interest on finance lease obligations		1		2
Total net lease cost	$	119	$	124

Schedule of Supplemental Balance Sheet Information Related to Leases

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

	March 31, 2020						December 31, 2019
Operating leases:	Related Party		Other		Total		Related Party		Other		Total
Operating lease ROU assets	$	2,889	$	296	$	3,185	$	2,933	$	314	$	3,247
Current operating lease liabilities	$	164	$	83	$	247	$	158	$	81	$	239
Noncurrent operating lease liabilities		3,216		244		3,460		3,260		266		3,526
Total operating lease liabilities	$	3,380	$	327	$	3,707	$	3,418	$	347	$	3,765

	March 31, 2020			December 31, 2019
Finance leases:
Property and equipment, at cost	$	43		$	43
Accumulated amortization		(24	)		(22	)
Property and equipment, net	$	19		$	21
Current obligations of finance leases	$	9		$	8
Finance leases, net of current obligations		19			21
Total finance lease liabilities	$	28		$	29
Weighted average remaining lease term (in years):
Operating leases		10.7			11.0
Finance leases		2.8			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
	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	111	$	100
Operating cash flows from finance leases	$	1	$	2
Financing cash flows from finance leases	$	2	$	1
ROU assets obtained in exchange for lease liabilities:
Operating leases	$	3,507	$	3,513

Schedule of Maturities of Operating Lease Liabilities

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

Years Ending December 31st,	Operating Leases			Finance Leases
2020 (nine remaining months)	$	338		$	10
2021		462			12
2022		466			10
2023		461			5
2024		407			-
Thereafter		2,901			-
Total lease payments		5,035			37
Less amount representing interest		(1,328	)		(9	)
Total lease obligations		3,707			28
Less current portion		(247	)		(9	)
Long-term lease obligations	$	3,460		$	19

XML

Segments

3 Months Ended

Mar. 31, 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, and Validus. The factors considered in determining this aggregated reporting segment include the economic similarity of the businesses, the nature of services provided, production processes, types of customers and distribution methods.

The Company also determined that it has a software sales and related consulting reportable segment. SureHarvest, which includes Sow Organic and JVF Consulting, is the sole operating segment. This segment includes software license, maintenance, support and software-related consulting service revenues.

The Company’s chief operating decision maker (the Company’s CEO) allocates resources and assesses the performance of its operating segments. Segment management makes decisions, measures performance, and manages the business utilizing internal reporting operating segment information. Performance of operating segments are based on net sales, gross profit, selling, general and administrative expenses and most importantly, operating income.

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

	Three months ended March 31, 2020												Three months ended March 31, 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	$	1,266		$	2,144		$	-		$	3,410		$	1,425		$	2,273		$	-		$	3,698
Goodwill		1,133			1,813			-			2,946			1,133			2,011			-			3,144
Total assets		16,999			5,524			(4,530	)		17,993			13,031			5,518			-			18,549
Revenues:
Verification and certification service revenue	$	2,803		$	-		$	-		$	2,803		$	2,812		$	-		$	-		$	2,812
Product sales		725			-			-			725			641			-			-			641
Software license, maintenance and support services revenue		-			233			(90	)		143			-			344			(49	)		295
Software-related consulting service revenue		-			265			(24	)		241			-			221			(14	)		207
Total revenues	$	3,528		$	498		$	(114	)	$	3,912		$	3,453		$	565		$	(63	)	$	3,955
Costs of revenues:
Costs of verification and certification services		1,624			-			(90	)		1,534			1,595			-			(33	)		1,562
Costs of products		502			-			-			502			443			-			-			443
Costs of software license, maintenance and support services		-			146			-			146			-			154			-			154
Costs of software-related consulting services		-			120			-			120			-			130			-			130
Total costs of revenues		2,126			266			(90	)		2,302			2,038			284			(33	)		2,289
Gross profit		1,402			232			(24	)		1,610			1,415			281			(30	)		1,666
Depreciation & amortization		88			146			-			234			82			178			-			260
Other operating expenses		1,537			217			(24	)		1,730			1,511			226			(30	)		1,707
Segment operating (loss)/income	$	(223	)	$	(131	)	$	-		$	(354	)	$	(178	)	$	(123	)	$	-		$	(301	)
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:
Other expense (income)		(30	)		(3	)		-			(33	)		-			-			(31	)		(31	)
Income tax (benefit)/expense		-			-			(80	)		(80	)		-			-			(83	)		(83	)
Net loss attributable to non-controlling interest		-			-			-			-			-			44			-			44
Net (loss)/income attributable to WFCF	$	(193	)	$	(128	)	$	80		$	(241	)	$	(178	)	$	(79	)	$	114		$	(143	)

XML

Intangible and Other Assets (Tables)

3 Months Ended

Mar. 31, 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):

	March 31,		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		2,333		2,182
		2,924		2,762
Tradenames/trademarks (not subject to amortization)		465		465
		3,389		3,227
Other assets		21		21
Intangible and other assets:	$	3,410	$	3,248

XML

Revenue Recognition - Schedule of Revenues Disaggregated by Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Total revenues	$ 3,912	$ 3,955
Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	3,528	3,453
Product Sales [Member]
Segment Reporting Information [Line Items]
Total revenues	498	565
Software-Related Consulting Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	3,912	3,955
Software License, Maintenance and Support Services Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	(114)	(63)
Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	2,803	2,812
Software License, Maintenance and Support Services Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	143	295
Software-Related Consulting Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	241	207
Verification and Certification Segment [Member]
Segment Reporting Information [Line Items]
Total revenues	3,528	3,453
Verification and Certification Segment [Member] | Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	2,803	2,812
Verification and Certification Segment [Member] | Product Sales [Member]
Segment Reporting Information [Line Items]
Total revenues	725	641
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	498	565
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	265	221
Software Sales and Related Consulting Segment [Member] | Software License, Maintenance and Support Services Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	233	344
Eliminations and Other [Member]
Segment Reporting Information [Line Items]
Total revenues	(114)	(63)
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	(24)	(14)
Eliminations and Other [Member] | Software License, Maintenance and Support Services Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	(90)	(49)
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	3,912	3,955
Consolidated [Member] | Verification and Certification Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	2,803	2,812
Consolidated [Member] | Product Sales [Member]
Segment Reporting Information [Line Items]
Total revenues	725	641
Consolidated [Member] | Software-Related Consulting Service Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	241	207
Consolidated [Member] | Software License, Maintenance and Support Services Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	$ 143	$ 295

XML

Stock-Based Compensation - Schedule of Stock Option Activity (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Payment Arrangement [Abstract]
Number of stock options, Beginning Balance	437,126
Number of stock options, Granted	20,000
Number of stock options, Exercised
Number of stock options, Expired/Forfeited
Number of stock options, Ending Balance	457,126
Number of stock options, Exercisable Ending	318,812
Number of stock options, Unvested Ending	138,314
Weighted avg exercise price per share, Beginning Balance	$ 1.46
Weighted avg exercise price per share, Granted	1.81
Weighted avg exercise price per share, Exercised
Weighted avg exercise price per share, Expired/Forfeited
Weighted avg exercise price per share, Ending Balance	1.48
Weighted avg exercise price per share, Exercisable Ending	1.34
Weighted avg exercise price per share, Unvested Ending	1.78
Weighted avg grant date fair value per share, Beginning Balance	1.49
Weighted avg grant date fair value per share, Granted	2.05
Weighted avg grant date fair value per share, Exercised
Weighted avg grant date fair value per share, Expired/Forfeited
Weighted avg grant date fair value per share, Ending Balance	1.52
Weighted avg grant date fair value per share, Exercisable Ending	1.36
Weighted avg grant date fair value per share, Unvested Ending	$ 1.88
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 10 months 25 days
Weighted avg remaining contractual life (in years), Exercised	0 years
Weighted avg remaining contractual life (in years), Expired/Forfeited	0 years
Weighted avg remaining contractual life (in years), Ending Balance	5 years 9 months 25 days
Weighted avg remaining contractual life (in years), Exercisable Ending	4 years 8 months 2 days
Weighted avg remaining contractual life (in years), Unvested Ending	8 years 9 months 3 days
Aggregate intrinsic value, Beginning Balance	$ 150,417
Aggregate intrinsic value, Granted
Aggregate intrinsic value, Ending Balance	178,795
Aggregate intrinsic value, Exercisable Ending	172,704
Aggregate intrinsic value, Unvested Ending	$ 6,091

XML

Leases - Schedule of Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Operating lease ROU assets	$ 3,204	$ 3,268
Current operating lease liabilities	247	239
Noncurrent operating lease liabilities	3,460	3,526
Total operating lease liabilities	3,707	3,765
Property and equipment, net	1,575	1,545
Current obligations of finance leases	9	8
Finance leases, net of current obligations	19	21
Total finance lease liabilities	$ 28	$ 29
Weighted average remaining operating lease term (in years)	10 years 8 months 12 days	11 years
Weighted average remaining finance lease term (in years)	2 years 9 months 18 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	$ 2,889	$ 2,933
Current operating lease liabilities	164	158
Noncurrent operating lease liabilities	3,216	3,260
Total operating lease liabilities	3,380	3,418
Other [Member]
Operating lease ROU assets	296	314
Current operating lease liabilities	83	81
Noncurrent operating lease liabilities	244	266
Total operating lease liabilities	327	347
Finance Leases [Member]
Property and equipment, at cost	43	43
Accumulated amortization	(24)	(22)
Property and equipment, net	$ 19	$ 21

XML

Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2020

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Note 14 – Supplemental Cash Flow Information

	Three months ended March 31,
(Amounts in thousands)	2020		2019
Cash paid during the year:
Interest expense	$	2	$	3
Income taxes	$	-	$	-

XML

Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 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):

	March 31,		December 31,
	2020		2019
Income and sales taxes payable	$	97	$	171
Payroll related accruals		218		201
Customer deposits		90		62
Professional fees and other expenses		178		240
	$	583	$	674

XML

Segments (Tables)

3 Months Ended

Mar. 31, 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 March 31, 2020												Three months ended March 31, 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	$	1,266		$	2,144		$	-		$	3,410		$	1,425		$	2,273		$	-		$	3,698
Goodwill		1,133			1,813			-			2,946			1,133			2,011			-			3,144
Total assets		16,999			5,524			(4,530	)		17,993			13,031			5,518			-			18,549
Revenues:
Verification and certification service revenue	$	2,803		$	-		$	-		$	2,803		$	2,812		$	-		$	-		$	2,812
Product sales		725			-			-			725			641			-			-			641
Software license, maintenance and support services revenue		-			233			(90	)		143			-			344			(49	)		295
Software-related consulting service revenue		-			265			(24	)		241			-			221			(14	)		207
Total revenues	$	3,528		$	498		$	(114	)	$	3,912		$	3,453		$	565		$	(63	)	$	3,955
Costs of revenues:
Costs of verification and certification services		1,624			-			(90	)		1,534			1,595			-			(33	)		1,562
Costs of products		502			-			-			502			443			-			-			443
Costs of software license, maintenance and support services		-			146			-			146			-			154			-			154
Costs of software-related consulting services		-			120			-			120			-			130			-			130
Total costs of revenues		2,126			266			(90	)		2,302			2,038			284			(33	)		2,289
Gross profit		1,402			232			(24	)		1,610			1,415			281			(30	)		1,666
Depreciation & amortization		88			146			-			234			82			178			-			260
Other operating expenses		1,537			217			(24	)		1,730			1,511			226			(30	)		1,707
Segment operating (loss)/income	$	(223	)	$	(131	)	$	-		$	(354	)	$	(178	)	$	(123	)	$	-		$	(301	)
Other items to reconcile segment operating income (loss) to net income attributable to WFCF:
Other expense (income)		(30	)		(3	)		-			(33	)		-			-			(31	)		(31	)
Income tax (benefit)/expense		-			-			(80	)		(80	)		-			-			(83	)		(83	)
Net loss attributable to non-controlling interest		-			-			-			-			-			44			-			44
Net (loss)/income attributable to WFCF	$	(193	)	$	(128	)	$	80		$	(241	)	$	(178	)	$	(79	)	$	114		$	(143	)

XML

Leases - Schedule of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Lessee Disclosure [Abstract]
Operating lease cost	$ 116	$ 120
Finance lease cost amortization of assets	2	2
Interest on finance lease obligations	1	2
Total net lease cost	$ 119	$ 124

XML

Revenue Recognition (Details Narrative) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Accounts receivable from contracts with customers, net of allowance for doubtful accounts	$ 2,000	$ 2,500
Deferred revenue from contracts with customers	$ 1,413	$ 797

XML

Stock-Based Compensation - Schedule of Unrecognized Compensation Cost from Unvested Awards (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Unvested stock options	$ 194
Unvested restricted stock awards	4
Total unrecognized compensation expense	198
2020 (Remaining Nine Months) [Member]
Unvested stock options	94
Unvested restricted stock awards	3
Total unrecognized compensation expense	97
2021 [Member]
Unvested stock options	83
Unvested restricted stock awards	1
Total unrecognized compensation expense	84
2022 [Member]
Unvested stock options	16
Unvested restricted stock awards
Total unrecognized compensation expense	16
2023 [Member]
Unvested stock options	1
Unvested restricted stock awards
Total unrecognized compensation expense	$ 1

XML

Leases - Schedule of Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Lessee Disclosure [Abstract]
2020 (remaining nine months)	$ 338
2021	462
2022	466
2023	461
2024	407
Thereafter	2,901
Total lease payments	5,035
Less amount representing interest	(1,328)
Total lease obligations	3,707	$ 3,765
Less current portion	(247)	(239)
Long-term lease obligations	3,460	3,526
2020 (remaining nine months)	10
2021	12
2022	10
2023	5
2024
Thereafter
Total lease payments	37
Less amount representing interest	(9)
Total lease obligations	28	29
Less current portion	(9)	(8)
Long-term lease obligations	$ 19	$ 21

XML

Subsequent Events (Details Narrative) - Paycheck Protection Program [Member] - USD ($)		3 Months Ended
	Apr. 17, 2020	Mar. 31, 2020
Proceeds from loans		$ 350,000,000,000
Subsequent Event [Member]
Proceeds from loans	$ 1,000,000
Debt maturity date	Apr. 17, 2022
Annual interest rate	1.00%
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

XML

Stock-Based Compensation - Schedule of Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stock-based compensation expense	$ 31	$ 45
Stock Options [Member]
Stock-based compensation expense	30	39
Restricted Stock Awards [Member]
Stock-based compensation expense	$ 1	$ 6

XML

Intangible and Other Assets - Schedule of Intangible and Other Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Intangible and other assets, gross	$ 5,257	$ 4,944
Less accumulated amortization	2,333	2,182
Intangible and other assets, net	2,924	2,762
Tradenames/trademarks (not subject to amortization)	465	465
Intangible assets	3,389	3,227
Other assets	21	21
Intangible and other assets, net	3,410	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

XML

Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2020

Supplemental Cash Flow Information [Abstract]

Schedule of Supplemental Cash Flow Information

	Three months ended March 31,
(Amounts in thousands)	2020		2019
Cash paid during the year:
Interest expense	$	2	$	3
Income taxes	$	-	$	-

XML

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019
Revenues:
Total revenues		$ 3,912	$ 3,955
Costs of revenues:
Total costs of revenues		2,302	2,289
Gross profit		1,610	1,666
Selling, general and administrative expenses		1,964	1,967
(Loss)/income from operations		(354)	(301)
Other expense (income):
Dividend income from Progressive Beef		(30)	(30)
Other income, net		(2)	(3)
Gain on sale of assets			(1)
Gain on foreign currency exchange		(3)
Interest expense		2	3
(Loss)/income before income taxes		(321)	(270)
Income tax (benefit)/expense		(80)	(83)
Net (loss)/income		(241)	(187)
Net loss attributable to non-controlling interest			44
Net (loss)/income attributable to Where Food Comes From, Inc.		$ (241)	$ (143)
Per share - net (loss)/income attributable to Where Food Comes From, Inc.:
Basic	[1]
Diluted	[1]
Weighted average number of common shares outstanding:
Basic		24,947,000	24,957,000
Diluted		24,947,000	24,957,000
Verification and Certification Service Revenue [Member]
Revenues:
Total revenues		$ 2,803	$ 2,812
Costs of revenues:
Total costs of revenues		1,534	1,562
Product Sales [Member]
Revenues:
Total revenues		725	641
Costs of revenues:
Total costs of revenues		502	443
Software License, Maintenance and Support Services Revenue [Member]
Revenues:
Total revenues		143	295
Costs of revenues:
Total costs of revenues		146	154
Software-Related Consulting Service Revenue [Member]
Revenues:
Total revenues		241	207
Costs of revenues:
Total costs of revenues		$ 120	$ 130

[1] less than $0.01 per share

XML

Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 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):

	March 31,		December 31,
	2020		2019
Income and sales taxes payable	$	97	$	171
Payroll related accruals		218		201
Customer deposits		90		62
Professional fees and other expenses		178		240
	$	583	$	674

XML

Revenue Recognition

3 Months Ended

Mar. 31, 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 March 31, 2020									Three months ended March 31, 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
Revenues:
Verification and certification service revenue	$	2,803	$	-	$	-		$	2,803	$	2,812	$	-	$	-		$	2,812
Product sales		725		-		-			725		641		-		-			641
Software license, maintenance and support services revenue		-		233		(90	)		143		-		344		(49	)		295
Software-related consulting service revenue		-		265		(24	)		241		-		221		(14	)		207
Total revenues	$	3,528	$	498	$	(114	)	$	3,912	$	3,453	$	565	$	(63	)	$	3,955

Contract Balances

As of March 31, 2020, and December 31, 2019, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $2.0 and $2.5 million, respectively.

As of March 31, 2020, and December 31, 2019, deferred revenue from contracts with customers was approximately $1.4 and $0.8 million, respectively. The balance of the contract liabilities at March 31, 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 March 31, 2020 (amounts in thousands):

Deferred revenue:
Unearned revenue January 1, 2020	$	797
Unearned billings		1,235
Revenue recognized		(619	)
Unearned revenue March 31, 2020	$	1,413

XML

The Company and Basis of Presentation

3 Months Ended

Mar. 31, 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 Verifications Services, LLC (“Validus”), Sterling Solutions (“Sterling”), SureHarvest Services, Inc. (“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 loss 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 months ended March 31, 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.