Business Context and Reporting Period
Where Food Comes From, Inc. (WFCF) filed this Form 8-K on December 28, 2016, to report the completion of an asset acquisition. The Company, through its wholly-owned subsidiary SureHarvest Services LLC, acquired substantially all assets of SureHarvest, Inc., a provider of sustainability measurement, traceability, and certification software for the food and agriculture industries.
Key Financial Metrics and Transaction Details
The aggregate consideration for the acquisition was approximately $2.8 million, structured as follows:
- Cash: $1,122,000
- Equity (WFCF Common Stock): 850,852 shares valued at approximately $1,683,000 (based on a 4-week average closing price of $1.98 per share).
- Equity (Buyer Membership Interest): 40% membership interest in the Buyer entity.
The transaction was financed entirely through cash on hand. No specific revenue, profit, or debt metrics for WFCF or the acquired entity are provided in this filing; financial statements for the acquired business are scheduled to be filed within 71 days.
Material Changes and Governance
As a result of the acquisition, WFCF now controls a subsidiary focused on sustainability software. Governance of the Buyer entity is shared, with WFCF designating three managers and the Seller designating two managers to the board of managers. The Seller and its key manager, Jeff Dlott, are subject to non-compete covenants and an 18-month indemnification period during which the WFCF shares issued are held in escrow.
Outlook, Risks, and Unusual Items
An Employment Agreement was executed with Jeff Dlott, providing a base salary of approximately $168,000. The shares issued to the Seller were sold pursuant to Section 4(a)(2) and Rule 506 exemptions and are subject to resale restrictions. The filing notes that pro forma financial information will be provided in a future amendment. No specific risks or contingencies beyond standard indemnification and escrow provisions are detailed in this text.
Investor Verification Checklist
- Verify the 71-day filing deadline for the acquired business's financial statements and pro forma information.
- Confirm the impact of the $1.12 million cash outflow on the Company's current liquidity position.
- Review the escrow terms for the 850,852 shares issued to ensure understanding of potential dilution or clawback scenarios.
- Assess the strategic fit of SureHarvest's sustainability software with WFCF's existing operations.