UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended September 30, 2021 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ (I.R.S. Employer Identification No.) 202 6th Street, Suite 400 Castle Rock, CO 80104 (Address of principal executive offices, including zip code) Regi ...

Where Food Comes From, Inc. (NASDAQ:WFCF) Q2 2021 Earnings Conference Call August 5, 2021 ET Company Participants Jay Pfeiffer - Investor Relations John Saunders - Chief Executive Officer Leann Saunders - President Conference Call Participants Operator Greetings. Welcome to the Where Food Comes From Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that the ...

[Part I - Financial Information](index=2&type=section&id=Part%20I%20-%20Financial%20Information) This section presents the unaudited consolidated financial statements and management's analysis of Where Food Comes From, Inc.'s financial condition and operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section provides the unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and equity, with detailed explanatory notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity **Consolidated Balance Sheet Highlights (Amounts in thousands):** | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $8,659 | $7,474 | | Total assets | $20,262 | $19,448 | | Total current liabilities | $3,801 | $3,124 | | Total liabilities | $6,954 | $6,984 | | Total equity | $13,308 | $12,464 | - Total assets increased by **$814 thousand** from December 31, 2020, to June 30, 2021, primarily driven by an increase in cash and cash equivalents and inventory[8](index=8&type=chunk) - Total equity increased by **$844 thousand**, reflecting net income and additional paid-in capital, partially offset by treasury stock repurchases[8](index=8&type=chunk) [Consolidated Statements of Operations (Three Months Ended June 30)](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20(Three%20Months)) This section details the company's financial performance for the three months ended June 30, comparing revenues, expenses, and net income year-over-year **Consolidated Statements of Operations Highlights (Three Months Ended June 30, Amounts in thousands):** | Metric | 2021 | 2020 | Change (YoY) | | :-------------------------------- | :--- | :--- | :----------- | | Total revenues | $5,141 | $4,416 | +16.4% | | Gross profit | $2,009 | $2,100 | -4.3% | | Income from operations | $282 | $469 | -39.9% | | Net income | $202 | $351 | -42.5% | | Basic EPS | $0.03 | $0.06 | -50.0% | | Diluted EPS | $0.03 | $0.06 | -50.0% | - Total revenues increased by **16.4% year-over-year**, driven by growth in verification and certification service revenue and product sales[10](index=10&type=chunk) - Net income and EPS decreased significantly due to higher costs of revenues and selling, general and administrative expenses, leading to a lower gross profit and operating income[10](index=10&type=chunk) [Consolidated Statements of Operations (Six Months Ended June 30)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20(Six%20Months)) This section presents the company's financial performance for the six months ended June 30, highlighting revenue growth and a significant increase in net income **Consolidated Statements of Operations Highlights (Six Months Ended June 30, Amounts in thousands):** | Metric | 2021 | 2020 | Change (YoY) | | :-------------------------------- | :--- | :--- | :----------- | | Total revenues | $9,581 | $8,328 | +15.0% | | Gross profit | $3,871 | $3,710 | +4.3% | | Income from operations | $371 | $115 | +222.6% | | Net income | $1,352 | $110 | +1129.1% | | Basic EPS | $0.22 | $0.02 | +1000.0% | | Diluted EPS | $0.22 | $0.02 | +1000.0% | - Net income for the six months ended June 30, 2021, significantly increased by **1129.1% year-over-year**, primarily due to a **$1,037 thousand gain** from the forgiveness of a Paycheck Protection Program loan[13](index=13&type=chunk) - Total revenues grew by **15.0%**, with verification and certification service revenue increasing by **17.7%** and product sales by **11.0%**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30 **Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, Amounts in thousands):** | Activity | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Net cash provided by operating activities | $1,620 | $1,748 | | Net cash used in investing activities | $(128) | $(629) | | Net cash (used in) / provided by financing activities | $(569) | $760 | | Net change in cash | $923 | $1,879 | | Cash at end of period | $5,297 | $4,517 | - Net cash provided by operating activities slightly decreased from **$1,748 thousand** in 2020 to **$1,620 thousand** in 2021, despite higher net income, due to changes in working capital accounts[16](index=16&type=chunk) - Net cash used in financing activities shifted from a **$760 thousand inflow** in 2020 (due to PPP loan proceeds) to a **$569 thousand outflow** in 2021, primarily due to stock repurchases[16](index=16&type=chunk) [Consolidated Statements of Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Equity) This section details changes in the company's equity, including retained earnings, treasury stock, and additional paid-in capital **Consolidated Statements of Equity Highlights (Amounts in thousands):** | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Total Equity | $13,308 | $12,464 | | Retained Earnings | $4,900 | $3,548 | | Treasury Stock | $(3,308) | $(2,702) | | Additional Paid-in Capital | $11,710 | $11,612 | - Total equity increased by **$844 thousand** from December 31, 2020, to June 30, 2021, driven by net income and stock-based compensation, partially offset by common share repurchases[18](index=18&type=chunk) - The company repurchased **42 thousand common shares** under its Stock Buyback Plan during the six months ended June 30, 2021, totaling **$606 thousand**[18](index=18&type=chunk)[16](index=16&type=chunk) [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, significant transactions, and financial statement line items [Note 1 - The Company and Basis of Presentation](index=9&type=section&id=Note%201%20-%20The%20Company%20and%20Basis%20of%20Presentation) This note describes the company's business, its subsidiaries, and the basis for preparing the consolidated financial statements - Where Food Comes From, Inc. is an independent, third-party food verification company conducting on-site and desk audits for livestock, food, and agricultural products, ensuring claims are accurate[25](index=25&type=chunk) - The company also provides sustainability programs, compliance management, and farming information management solutions through a SaaS model, bundling annual software licenses with enhancements and professional services[26](index=26&type=chunk) - The financial statements are prepared in conformity with GAAP and include subsidiaries like WFCFO, Validus, Sterling, SureHarvest, A Bee Organic, Sow Organic, JVF Consulting, and Postelsia Holdings, Ltd[28](index=28&type=chunk) - The business is subject to seasonal fluctuations, with significant verification and certification service revenue typically realized from late May through early October, coinciding with peak calf marketings and growing seasons[33](index=33&type=chunk) [Note 2 – Basic and Diluted Net Income / (Loss) per Share](index=10&type=section&id=Note%202%20%E2%80%93%20Basic%20and%20Diluted%20Net%20Income%20%2F%20(Loss)%20per%20Share) This note details the calculation of basic and diluted net income per share, including the impact of dilutive securities **Weighted Average Common Shares Outstanding (in thousands):** | Period | Basic (2021) | Basic (2020) | Diluted (2021) | Diluted (2020) | | :-------------------------------- | :----------- | :----------- | :------------- | :------------- | | Three months ended June 30 | 6,100 | 6,219 | 6,186 | 6,258 | | Six months ended June 30 | 6,151 | 6,228 | 6,241 | 6,271 | - Diluted EPS calculations include the weighted average effects of dilutive securities, which were **86 thousand shares** for the three months ended June 30, 2021, and **90 thousand shares** for the six months ended June 30, 2021[36](index=36&type=chunk) [Note 3 - Investment in Progressive Beef, LLC](index=11&type=section&id=Note%203%20-%20Investment%20in%20Progressive%20Beef,%20LLC) This note outlines the dividend income received from the company's investment in Progressive Beef, LLC **Dividend Income from Progressive Beef (Amounts in thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $30 | $30 | | Six months ended June 30 | $60 | $60 | - The company received consistent dividend income of **$30 thousand** for both the three-month periods and **$60 thousand** for both the six-month periods ended June 30, 2021 and 2020, from its investment in Progressive Beef[39](index=39&type=chunk) [Note 4 – Intangible and Other Assets](index=11&type=section&id=Note%204%20%E2%80%93%20Intangible%20and%20Other%20Assets) This note provides a breakdown of intangible and other assets, including those subject to and not subject to amortization **Intangible and Other Assets (Amounts in thousands):** | Asset Category | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Intangible assets subject to amortization (net) | $2,278 | $2,462 | | Tradenames/trademarks (not subject to amortization) | $465 | $465 | | Other assets | $23 | $21 | | Total Intangible and other assets | $2,766 | $2,948 | - Total intangible and other assets decreased from **$2,948 thousand** at December 31, 2020, to **$2,766 thousand** at June 30, 2021, primarily due to accumulated amortization of intangible assets[40](index=40&type=chunk) [Note 5 – Accrued Expenses and Other Current Liabilities](index=11&type=section&id=Note%205%20%E2%80%93%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note details the components of accrued expenses and other current liabilities, including payroll and professional fees **Accrued Expenses and Other Current Liabilities (Amounts in thousands):** | Category | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Income and sales taxes payable | $32 | $168 | | Payroll related accruals | $709 | $271 | | Customer deposits | $28 | $31 | | Professional fees and other expenses | $349 | $129 | | Total | $1,118 | $599 | - Accrued expenses and other current liabilities increased by **$519 thousand** from December 31, 2020, to June 30, 2021, mainly driven by higher payroll-related accruals and professional fees[41](index=41&type=chunk) [Note 6 – Notes Payable](index=12&type=section&id=Note%206%20%E2%80%93%20Notes%20Payable) This note describes the company's debt facilities, including the Paycheck Protection Program loan and revolving line of credit **Long Term Debt (Amounts in thousands):** | Debt Type | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Paycheck Protection Program Loan | $0 | $1,035 | | Notes payable and other long-term debt (net of current portion) | $0 | $572 | - The Paycheck Protection Program (PPP) loan of **$1,035 thousand** and accrued interest was forgiven on March 4, 2021, resulting in no outstanding long-term debt at June 30, 2021[43](index=43&type=chunk) - The company maintains a revolving line of credit (LOC) of **$75,080**, maturing April 12, 2022, with an effective interest rate of **4.75%**, but had no outstanding amounts as of June 30, 2021, and December 31, 2020[44](index=44&type=chunk) [Note 7 – Stock-Based Compensation](index=12&type=section&id=Note%207%20%E2%80%93%20Stock-Based%20Compensation) This note outlines the company's stock-based compensation plans, including expense recognition and stock option activity **Stock-Based Compensation Expense (Amounts in thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $29 | $24 | | Six months ended June 30 | $54 | $55 | - The company awarded **17,000 stock options** at an exercise price of **$14.77 per share** during the three months ended June 30, 2021[46](index=46&type=chunk) - Unrecognized compensation cost from unvested awards totaled **$228 thousand** as of June 30, 2021, to be recognized ratably over the remaining vesting phase through 2024[48](index=48&type=chunk) **Stock Option Activity (June 30, 2021, all amounts adjusted for 1-for-4 reverse split):** | Metric | Number of awards | Weighted avg. exercise price per share | | :-------------------------------- | :--------------- | :------------------------------------- | | Outstanding, December 31, 2020 | 105,086 | $6.25 | | Granted | 17,000 | $14.77 | | Exercised | (17,763) | $2.30 | | Expired/Forfeited | (1,988) | $7.17 | | Outstanding, June 30, 2021 | 102,335 | $8.31 | | Exercisable, June 30, 2021 | 68,657 | $6.93 | | Unvested, June 30, 2021 | 33,678 | $11.12 | [Note 8 – Income Taxes](index=14&type=section&id=Note%208%20%E2%80%93%20Income%20Taxes) This note details the company's income tax expense and the factors influencing its effective tax rate **Income Tax Expense (Amounts in thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $104 | $145 | | Six months ended June 30 | $115 | $65 | - The effective tax rate for the six months ended June 30, 2021, was favorably impacted by the non-taxability of the PPP loan forgiveness income[55](index=55&type=chunk) [Note 9 - Revenue Recognition](index=15&type=section&id=Note%209%20-%20Revenue%20Recognition) This note disaggregates the company's revenue by category and discusses deferred revenue from customer contracts **Disaggregated Revenue (Three Months Ended June 30, Amounts in thousands):** | Revenue Category | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Verification and certification service revenue | $3,695 | $3,108 | | Product sales | $964 | $796 | | Software and related consulting revenue | $482 | $512 | | Total revenues | $5,141 | $4,416 | **Disaggregated Revenue (Six Months Ended June 30, Amounts in thousands):** | Revenue Category | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Verification and certification service revenue | $6,958 | $5,911 | | Product sales | $1,688 | $1,521 | | Software and related consulting revenue | $935 | $896 | | Total revenues | $9,581 | $8,328 | - Deferred revenue from contracts with customers increased from **$1.1 million** at December 31, 2020, to **$1.7 million** at June 30, 2021, with the balance expected to be recognized within one year[61](index=61&type=chunk) [Note 10 – Leases](index=17&type=section&id=Note%2010%20%E2%80%93%20Leases) This note provides information on the company's operating and finance lease liabilities, costs, and maturity schedules **Total Net Lease Cost (Amounts in thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $120 | $120 | | Six months ended June 30 | $240 | $239 | **Lease Liabilities (Amounts in thousands):** | Category | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Total operating lease liabilities | $3,424 | $3,525 | | Total finance lease liabilities | $37 | $44 | - The weighted average remaining lease term for operating leases was **9.5 years** (10.0 years in 2020) and for finance leases was **3.5 years** (3.7 years in 2020)[65](index=65&type=chunk) **Maturities of Lease Liabilities (Amounts in thousands):** | Years Ending December 31st | Operating Leases | Finance Leases | | :-------------------------------- | :--------------- | :------------- | | 2021 (six remaining months) | $241 | $7 | | 2022 | $482 | $15 | | 2023 | $468 | $10 | | 2024 | $407 | $5 | | 2025 | $405 | $5 | | Thereafter | $2,496 | $0 | | Total lease obligations | $3,424 | $37 | [Note 11 – Commitments and Contingencies](index=19&type=section&id=Note%2011%20%E2%80%93%20Commitments%20and%20Contingencies) This note addresses potential legal actions and administrative proceedings in the ordinary course of business - The company may be involved in various legal actions and administrative proceedings in the ordinary course of business but is not aware of any significant legal actions at this time[69](index=69&type=chunk) [Note 12 - Segments](index=19&type=section&id=Note%2012%20-%20Segments) This note disaggregates the company's financial performance into its two reportable segments: Verification and Certification, and Software and Related Consulting - The company operates in two reportable segments: Verification and Certification, and Software and Related Consulting[70](index=70&type=chunk)[71](index=71&type=chunk) - The Verification and Certification segment includes IMI Global, WFCFO, and Validus, aggregating operations due to economic similarities and nature of services[70](index=70&type=chunk) - The Software and Related Consulting segment, primarily SureHarvest (including Postelsia), focuses on software license, maintenance, support, and consulting services[71](index=71&type=chunk) **Segment Operating Income (Three Months Ended June 30, Amounts in thousands):** | Segment | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Verification and Certification Segment | $289 | $509 | | Software and Related Consulting Segment | $(7) | $(40) | | Consolidated Income from operations | $282 | $469 | **Segment Operating Income (Six Months Ended June 30, Amounts in thousands):** | Segment | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Verification and Certification Segment | $396 | $286 | | Software and Related Consulting Segment | $(25) | $(171) | | Consolidated Income from operations | $371 | $115 | [Note 13 – Supplemental Cash Flow Information](index=22&type=section&id=Note%2013%20%E2%80%93%20Supplemental%20Cash%20Flow%20Information) This note provides supplemental cash flow details, including cash paid for interest and income taxes **Cash Paid During the Six Months Ended June 30 (Amounts in thousands):** | Expense Type | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Interest expense | $1 | $5 | | Income taxes | $345 | $10 | - Cash paid for income taxes significantly increased from **$10 thousand** in 2020 to **$345 thousand** in 2021[77](index=77&type=chunk) [Note 14 – Subsequent Events](index=22&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) This note discloses significant events that occurred after the reporting period, such as dividend declarations - On July 1, 2021, the Board of Directors declared a special cash dividend of **$0.15 per common share**, payable on August 16, 2021, to stockholders of record as of July 27, 2021[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition and operational results, covering business overview, COVID-19 impact, seasonality, liquidity, and segment performance [General](index=23&type=section&id=General) This section provides context for the management discussion, advising it be read with the consolidated financial statements - This discussion should be read in conjunction with the consolidated financial statements and notes in Item 1 and the audited financial statements in the Form 10-K for the fiscal year ended December 31, 2020[80](index=80&type=chunk) [Business Overview](index=23&type=section&id=Business%20Overview) This section describes the company's core business as a third-party food verification resource and its expanded offerings through recent acquisitions - Where Food Comes From, Inc. is a leading third-party verification resource for food production practices in North America, supporting over **15,000 farmers, ranchers, and other food industry participants**[81](index=81&type=chunk) - The company's core business involves on-site and desk audits to verify claims about livestock, crops, and other food products, ensuring credibility for claims like gluten-free, non-GMO, and humane handling[81](index=81&type=chunk) - Through recent acquisitions, the company offers sustainability programs, compliance management, and farming information management solutions via a SaaS model, bundling software licenses with professional services[82](index=82&type=chunk) - The Where Food Comes From Source Verified® labeling program connects consumers to food sources using product labeling and QR technology for web-based information sharing[83](index=83&type=chunk) [Coronavirus Pandemic (COVID-19)](index=23&type=section&id=Coronavirus%20Pandemic%20(COVID-19)) This section discusses the risks and operational adaptations of the company in response to the COVID-19 pandemic - The COVID-19 pandemic poses risks including inability to perform on-site audits, supplier disruptions, and potential negative impacts on revenue and costs due to disarray in food systems[85](index=85&type=chunk) - As an essential business, the company maintained standard operations by allowing most employees to work remotely, with essential staff on-site, and internal controls over financial reporting were not impacted[86](index=86&type=chunk) - The company is adapting by working with standard-setting bodies and identifying innovative solutions for verification and certification activities, believing third-party verification is essential to the food supply chain[87](index=87&type=chunk) [Seasonality](index=24&type=section&id=Seasonality) This section explains the seasonal fluctuations in the company's revenue, particularly for verification and certification services - The business experiences seasonal fluctuations, with a significant portion of verification and certification service revenue generated from late May through early October, coinciding with peak calf marketings and growing seasons[89](index=89&type=chunk) - Quarterly results are not necessarily indicative of full fiscal year performance due to this seasonality[89](index=89&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's cash position, working capital, and cash flow activities, along with future growth plans **Liquidity Highlights (Amounts in millions):** | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $5.3 | $4.4 | | Working capital | $4.9 | $4.4 | **Cash Flow from Activities (Six Months Ended June 30, Amounts in millions):** | Activity | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Net cash provided by operating activities | $1.6 | $1.7 | | Net cash used in investing activities | $0.1 | $0.6 | | Net cash used in financing activities | $0.6 | $(0.8) | | Net change in cash | $0.9 | $1.9 | - Operating cash flow is primarily driven by gross margin from third-party verification solutions, with management focusing on revenue growth and long-term projects to ensure steady operating profits[95](index=95&type=chunk) - The company plans for continued growth through diversification of product offerings in national and international markets, as well as potential acquisitions, leveraging growing consumer awareness and demand[97](index=97&type=chunk) [Debt Facility](index=25&type=section&id=Debt%20Facility) This section details the company's revolving line of credit and the forgiveness of its Paycheck Protection Program loan - The company has a revolving line of credit (LOC) of **$75,080**, maturing April 12, 2022, with an interest rate of Wall Street Journal prime plus **1.50%**, collateralized by WFCFO's business assets[98](index=98&type=chunk) - No amounts were outstanding under the LOC as of June 30, 2021, and December 31, 2020[98](index=98&type=chunk) - A **$1.0 million** Paycheck Protection Program (PPP) loan received in April 2020 was forgiven on March 4, 2021[99](index=99&type=chunk) [Off-Balance Sheet Arrangements](index=25&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements for the company as of the reporting date - As of June 30, 2021, the company had no off-balance sheet arrangements[100](index=100&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes the financial performance of the company's operating segments, including revenue, gross margin, and net income [Verification and Certification Segment](index=28&type=section&id=Verification%20and%20Certification%20Segment) This section details the revenue and gross margin performance of the Verification and Certification segment, highlighting growth drivers and cost impacts - Verification and certification service revenue increased by **18.9%** for the three months and **17.7%** for the six months ended June 30, 2021, driven by increased customer demand[104](index=104&type=chunk) - Product sales, primarily cattle identification ear tags, increased by **21.1%** for the three months and **11.0%** for the six months, due to demand for source and age verification[105](index=105&type=chunk) - Gross margin for this segment decreased to **40.3%** (three months) and **41.9%** (six months) in 2021, down from **48.3%** and **43.0%** in 2020, due to changes in product mix, new offerings, returned demand for delayed audits, and increased compensation expenses[106](index=106&type=chunk) [Software and Related Consulting Segment](index=28&type=section&id=Software%20and%20Related%20Consulting%20Segment) This section reviews the revenue and gross margin trends for the Software and Related Consulting segment, noting its strategic role - Software and related consulting revenue remained relatively flat for both the three and six months ended June 30, 2021, compared to 2020[108](index=108&type=chunk) - Gross margin for this segment decreased to **27.0%** (three months) and **27.3%** (six months) in 2021, from **41.6%** and **49.7%** in 2020, primarily due to increased labor costs for technology enhancements[109](index=109&type=chunk) - The company views the software segment as ancillary to its overall business, focusing on maintaining proprietary software and leveraging data to enhance competitiveness in the verification market, rather than licensing to others[112](index=112&type=chunk) [Dividend Income from Progressive Beef](index=29&type=section&id=Dividend%20Income%20from%20Progressive%20Beef) This section reports the consistent dividend income received from the investment in Progressive Beef **Dividend Income from Progressive Beef (Amounts in thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $30 | $30 | | Six months ended June 30 | $60 | $60 | - Consistent dividend income of **$30 thousand** for the three-month periods and **$60 thousand** for the six-month periods was received from Progressive Beef in both 2021 and 2020[113](index=113&type=chunk) [Income Tax Expense](index=29&type=section&id=Income%20Tax%20Expense) This section details the income tax expense and the impact of the PPP loan forgiveness on the effective tax rate **Income Tax Expense (Amounts in thousands):** | Period | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $104 | $145 | | Six months ended June 30 | $115 | $65 | - The effective tax rate for the six months ended June 30, 2021, was positively influenced by the non-taxability of the PPP loan forgiveness income[114](index=114&type=chunk) [Net Income and Per Share Information](index=29&type=section&id=Net%20Income%20and%20Per%20Share%20Information) This section summarizes the net income and earnings per share, highlighting the impact of the PPP loan forgiveness **Net Income and EPS (Amounts in millions, except per share):** | Metric | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Net income | $0.2 | $1.4 | $0.4 | $0.1 | | Basic EPS | $0.03 | $0.22 | $0.06 | $0.02 | | Diluted EPS | $0.03 | $0.22 | $0.06 | $0.02 | - Net income for the six months ended June 30, 2021, significantly increased to **$1.4 million** (from **$0.1 million** in 2020), largely due to the PPP loan forgiveness[115](index=115&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates the effectiveness of the company's disclosure controls and internal control over financial reporting, reporting no material changes [Evaluation of Disclosure Controls and Procedures](index=30&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2021 - Management, including principal executive and financial officers, concluded that disclosure controls and procedures were effective as of June 30, 2021, ensuring timely and accurate reporting[116](index=116&type=chunk) [Internal Control Over Financial Reporting](index=30&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) This section addresses management's responsibility for internal control over financial reporting and reports no material changes - Management is responsible for establishing and maintaining adequate internal control over financial reporting, which provides reasonable assurance regarding financial statement preparation[117](index=117&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the most recent fiscal quarter[118](index=118&type=chunk) [Part II - Other Information](index=31&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, risk factors, equity security sales, and required exhibits [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company may be involved in routine legal actions but is not currently aware of any significant legal proceedings - The company may be involved in various legal actions, administrative proceedings, and claims in the ordinary course of business[121](index=121&type=chunk) - Losses for claims are recorded when probable and estimable, and no significant legal actions are currently known[121](index=121&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors identified in the company's 2020 Annual Report on Form 10-K and acknowledges the uncertain economic impact of the coronavirus pandemic - The company's business is subject to risks identified in Item 1A of its 2020 Annual Report on Form 10-K[122](index=122&type=chunk) - As of June 30, 2021, the economic impact of the coronavirus pandemic on the company is recognized, but management cannot estimate its financial impact[122](index=122&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchase activity under its Stock Buyback Plan for the three months ended June 30, 2021 - The Board of Directors approved a Stock Buyback Plan on September 30, 2019, to repurchase up to **ten million additional shares** of common stock[123](index=123&type=chunk) **Issuer Purchases of Equity Securities (Three Months Ended June 30, 2021, Amounts in thousands, except per share):** | Month | Number of Shares | Cost of Shares | Average Cost per Share | | :-------------------------------- | :--------------- | :------------- | :--------------------- | | April 2021 | 6 | $87 | $14.56 | | May 2021 | 3 | $48 | $14.27 | | June 2021 | 4 | $60 | $15.00 | | Total | 13 | $195 | $15.00 | [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications required by the Sarbanes-Oxley Act - Exhibits include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[124](index=124&type=chunk)

Where Food Comes From, Inc. (NASDAQ:WFCF) Q1 2021 Earnings Conference Call May 6, 2021 12:00 PM ET Company Participants Jay Pfeiffer - Investor Relations John Saunders - Chief Executive Officer Leann Saunders - President Dannette Henning - Chief Financial Officer Conference Call Participants Andreas Aaen - Symmetry Investments Raphi Savitz - RYS Advisors Operator Greetings and welcome to Where Food Comes From First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief ques ...

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, 2021 [ ] 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) (State or other jurisdiction of inco ...

Financial Data and Key Metrics Changes - The company reported revenue of $20.1 million for 2020, a slight decrease from $20.8 million in the previous year, reflecting the impact of COVID-19 restrictions [7] - Net income reached a record high of $1.4 million, equating to $0.22 per share, supported by a lean operating model and reduced costs in marketing, travel, and other areas [8] - Cash generated from operations was $2.5 million, down from $2.9 million year-over-year, while working capital improved to $4.4 million from $3.1 million [9] Business Line Data and Key Metrics Changes - Total verification revenue declined by $1.3 million, but tag sales associated with the beef business increased by $559,000, or 17% [8] - The beef business showed strong growth, with year-over-year growth estimated at 20% to 25%, driven by demand for premium verifications [27][28] Market Data and Key Metrics Changes - The company experienced a significant decline in auditing activity for pork, poultry, dairy, and egg customers due to pandemic-related restrictions, impacting revenue from these service categories [11] - The beef business's resilience helped offset declines in other verification categories, with premium verifications prioritized during operational challenges faced by packing plants [13] Company Strategy and Development Direction - The company is focused on sustainability initiatives, launching the beef care sustainability program and acquiring Postelsia to enter the seafood industry [15][17] - A one-for-four reverse stock split was executed to meet NASDAQ listing standards, with expectations that this will enhance visibility and attract institutional investors [22][23] Management's Comments on Operating Environment and Future Outlook - Management anticipates COVID-related challenges to persist at least through the second quarter of the following year but is prepared for potential ongoing impacts [7] - The pandemic has accelerated technological innovation within the company, particularly in remote auditing, which is expected to remain a component of operations moving forward [31][32] Other Important Information - The company has added four new standards across different proteins and is actively pursuing new customers through targeted marketing strategies rather than traditional trade shows [17][36] Q&A Session Summary Question: Can you provide details on beef sales growth? - Management indicated that tag sales growth was about 17%, with overall beef sales growth estimated at 20% to 25% year-over-year [27] Question: Was the tag business impacted by COVID? - Management noted an initial increase in tag sales as premium verifications were prioritized during the pandemic [28] Question: How has COVID changed the industry? - Management highlighted that the pandemic has led to increased technology use and has resulted in some competitors exiting the market [29][32] Question: What is the timeline for NASDAQ listing? - Management stated they are in weekly communication with NASDAQ but do not have a firm timeline for completion [35] Question: Are you actively seeking new customers for verification? - Management confirmed a shift to more targeted outreach via social media and online platforms, moving away from traditional trade shows [36][39] Question: Any sentiment among ranchers regarding China blocking beef imports from Australia? - Management has not heard any specific sentiment but noted significant year-over-year growth in exports to China [51][52]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 [ ] TRANSITION REPORT PURSUANT TO 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) (State of incorporation or or ...

Where Food Comes From, Inc. (NASDAQ:WFCF) Q3 2020 Results Conference Call November 5, 2020 12:00 PM ET Company Participants Jay Pfeiffer - IR John Saunders - CEO Leann Saunders - President Dannette Henning - CFO Conference Call Participants Raphi Savitz - RYS Advisors Operator Greetings, and welcome to Where Food Comes From Third Quarter Earnings Conference Call. At this time all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions ...

[Part 1 - Financial Information](index=3&type=section&id=Part%201%20-%20Financial%20Information) This section provides a comprehensive overview of the company's financial performance and position for the period ended September 30, 2020 [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended September 30, 2020, indicate growth in total assets and equity, alongside improved net income and positive operating cash flow [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2020, the balance sheet shows an increase in total assets and equity, primarily driven by higher cash and long-term debt Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $4,625 | $2,638 | | Total current assets | $8,127 | $5,861 | | Total assets | $20,261 | $18,237 | | **Liabilities & Equity** | | | | Total current liabilities | $4,190 | $2,741 | | Long term debt, net | $391 | $ - | | Total liabilities | $7,923 | $6,288 | | Total equity | $12,338 | $11,949 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The statements of operations for Q3 and nine months ended September 30, 2020, reflect increased income from operations and net income despite slight revenue declines Q3 2020 vs Q3 2019 Performance (in thousands, except per share) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Total revenues | $6,197 | $6,232 | | Gross profit | $2,762 | $2,587 | | Income from operations | $956 | $614 | | Net income attributable to WFCF | $730 | $541 | | Diluted EPS | $0.03 | $0.02 | Nine Months 2020 vs 2019 Performance (in thousands, except per share) | Metric | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | | Total revenues | $14,525 | $15,075 | | Gross profit | $6,472 | $6,341 | | Income from operations | $1,071 | $717 | | Net income attributable to WFCF | $840 | $759 | | Diluted EPS | $0.03 | $0.03 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2020, cash flows show positive operating activities, significant investing outflows for acquisitions, and financing inflows from debt partially offset by stock repurchases Cash Flow Summary (Nine months ended Sep 30, in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,176 | $2,335 | | Net cash used in investing activities | $(682) | $(14) | | Net cash provided by (used in) financing activities | $493 | $(383) | | **Net change in cash** | **$1,987** | **$1,938** | | **Cash at end of period** | **$4,625** | **$3,420** | [Consolidated Statement of Equity](index=7&type=section&id=Consolidated%20Statement%20of%20Equity) Total equity increased as of September 30, 2020, primarily due to net income, partially offset by stock repurchases - Total equity increased by approximately **$389,000** in the first nine months of 2020, reaching **$12.338 million**[21](index=21&type=chunk) - Key changes to equity included net income of **$730,000** and stock repurchases of **$265,000** in Q3 2020[21](index=21&type=chunk) [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide details on the company's SaaS-based food verification business, significant events like the Postelsia acquisition and PPP loan, and its seasonal revenue patterns - The company is an independent, third-party food verification company that also provides sustainability programs and management solutions through a **SaaS model**[24](index=24&type=chunk)[25](index=25&type=chunk) - On February 21, 2020, the company acquired Postelsia Holdings, Ltd., a leader in sustainability programs for the seafood industry, for **$300,000 in cash**[36](index=36&type=chunk)[37](index=37&type=chunk) - The company received a **$1.0 million** loan under the Paycheck Protection Program (PPP) on April 17, 2020, with a **1.00% interest rate**; payment start date was modified to May 1, 2021[50](index=50&type=chunk)[85](index=85&type=chunk) - The business is seasonal, with a significant portion of verification and certification revenue realized from late May through early October[31](index=31&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the COVID-19 impact on operations, highlighting strong liquidity, segment-specific revenue trends, and overall net income improvement due to margin and expense management - The COVID-19 pandemic has led to some customers postponing onsite audits, but the company has maintained operations as an essential business, with many employees working remotely[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - As of September 30, 2020, the company had approximately **$4.9 million** in cash, cash equivalents, and certificates of deposit, with working capital of **$3.9 million**[98](index=98&type=chunk) - The company received a **$1.0 million** PPP loan and repurchased **$0.5 million** of common stock in the first nine months of 2020[101](index=101&type=chunk)[106](index=106&type=chunk) Q3 2020 vs Q3 2019 Net Income (in thousands) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Net income attributable to WFCF | $730 | $541 | [Results of Operations by Segment](index=27&type=section&id=RESULTS%20OF%20OPERATIONS) Q3 2020 segment performance shows a revenue decrease in Verification and Certification due to COVID-19, offset by improved gross margin, while Software Sales saw mixed revenue trends and a gross margin decline - **Verification and Certification Segment:** - Q3 2020 service revenue decreased **9.5% YoY** due to COVID-19 audit delays[111](index=111&type=chunk) - Q3 2020 product (ear tag) sales increased **25.4% YoY**[112](index=112&type=chunk) - Gross margin for this segment increased to **45.3%** in Q3 2020 from **41.3%** in Q3 2019, partly due to a shift to desk audits[113](index=113&type=chunk) - **Software Sales and Related Consulting Segment:** - Q3 2020 software license revenue decreased **14.6% YoY** due to customer budget delays[115](index=115&type=chunk) - Q3 2020 software consulting revenue increased **43.7% YoY** due to fluctuations in customer demand[116](index=116&type=chunk) - Gross margin for this segment declined to **36.4%** in Q3 2020 from **43.2%** in Q3 2019[117](index=117&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[124](index=124&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[126](index=126&type=chunk) [Part II - Other Information](index=32&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal matters, risk factors, equity transactions, and required certifications [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently aware of any significant legal actions, though it may be involved in ordinary course business litigation - The company is not aware of any significant legal actions at this time[129](index=129&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company's business is subject to risks outlined in its 2019 Form 10-K, with the coronavirus pandemic's full financial impact currently unestimable - The company recognizes the coronavirus pandemic as a risk factor but cannot estimate the potential financial impact[130](index=130&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2020, the company repurchased common stock from the open market under its approved buyback plan Q3 2020 Stock Repurchases | Month | Number of Shares | Cost of Shares | Average Cost per Share | | :--- | :--- | :--- | :--- | | July 2020 | 55,665 | $85,778 | $1.54 | | August 2020 | 74,742 | $119,840 | $1.60 | | September 2020 | 31,112 | $59,699 | $1.92 | | **Total** | **161,519** | **$265,317** | **$1.64** | [Exhibits](index=32&type=section&id=Item%206.%20Exhibits) The report includes required CEO and CFO certifications under the Sarbanes-Oxley Act - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[132](index=132&type=chunk)

Where Food Comes From, Inc. (NASDAQ:WFCF) Q2 2020 Earnings Conference Call August 13, 2020 12:00 PM ET Company Participants Jay Pfeiffer - IR John Saunders - CEO Leann Saunders - President Dannette Henning - CFO Conference Call Participants Terry Thompson - Private Investor Chris Brown - Private Investor Alex Team - First Ballantyne Operator Greetings, and welcome to Where Food Comes From Second Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer ...