Where Food es From(WFCF) - 2019 Q4 - Annual Report

Revenue Growth - Verification and certification service revenue for the year ended December 31, 2019 increased approximately $1.82 million, or 13.3% compared to 2018, driven by new verification customers and increased product offerings [129] - Product sales for the year ended December 31, 2019 increased approximately $1.0 million, or 45.6% compared to 2018, primarily due to the re-opening of the China export market [129] - Total revenues for the year ended December 31, 2019 were $20,774,416, an increase from $17,803,559 in 2018 [126] - Software license, maintenance and support services revenue increased approximately 7.4% over 2018, due to an increase in billable hours for software enhancements [132] - Software-related consulting service revenue increased approximately 5.3% over 2018, driven by growth in customer education and training services [133] Profitability - Gross profit for the year ended December 31, 2019 was $9,079,415, compared to $7,743,751 in 2018 [126] - Gross margin for the software sales and related consulting segment increased to 58.6% in 2019, compared to 41.1% in 2018 [134] - For the year ended December 31, 2019, net income attributable to WFCF shareholders was approximately $1,345,200, or $0.05 per share, compared to $800,700, or $0.03 per share in 2018, representing a 68% increase in net income [140] Expenses and Costs - Selling, general and administrative expenses for the year ended December 31, 2019 increased 5.5% compared to 2018, attributed to increased headcount and compliance costs [131] - Costs of revenues for the verification and certification segment were approximately $10.6 million in 2019, compared to $9.0 million in 2018 [130] Cash Flow and Liquidity - Cash, cash equivalents, and certificates of deposits totaled approximately $2.9 million as of December 31, 2019, up from approximately $2.0 million in 2018, indicating a 45% increase in liquidity [141] - Net cash provided by operating activities during 2019 was approximately $2.9 million, compared to $1.2 million in 2018, reflecting a 142% increase in cash flow from operations [142] - Net cash used in investing activities decreased to approximately $1.1 million in 2019 from approximately $2.0 million in 2018, primarily due to the acquisition of non-controlling interest in SureHarvest [143] - Net cash used in financing activities was approximately $0.6 million in 2019, compared to $0.4 million in 2018, primarily due to share repurchases [145] Deferred Revenue and Future Outlook - The company had deferred revenue of approximately $0.6 million at December 31, 2019, compared to $0.5 million in 2018, indicating a 20% increase in future revenue recognition [158] - The company plans to focus on diversification in product offerings and potential acquisitions to capitalize on growing consumer awareness and demand [149] Goodwill and Intangible Assets - As of December 31, 2019, the company had approximately $2.9 million of goodwill, with no impairment losses recognized during the year [178] - As of December 31, 2019, the fair value of SureHarvest did not exceed the carrying value of net assets by approximately 4.0%, resulting in a goodwill impairment of $0.2 million for the year [179] - Definite-lived intangible assets are amortized over useful lives ranging from two to fifteen years, based on the nature of the assets and historical experience [180] - The company evaluates the remaining useful life of indefinite-lived intangible assets each reporting period, concluding that no changes were necessary as of December 31, 2019 [188] Accounting Policies - The company adopted ASU 2016-02: Leases (Topic 842) as of January 1, 2019, impacting the accounting for operating and finance leases [183] - ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term [185] - Business combinations are accounted for by allocating the purchase price to tangible and intangible assets based on their estimated fair values at the acquisition date [189] - The company uses various recognized valuation methods, including present value modeling, to determine the fair values of assets acquired in business combinations [190] - Deferred revenue is re-measured at the acquisition date to reflect the cost related to the associated legal performance obligation assumed during the acquisition [191] - Recent accounting pronouncements are detailed in Note 2 of the consolidated financial statements [193]