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,~~June 30, 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~~001-40314

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^th6th Street, Suite 400

Castle Rock, CO80104

(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:~~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 ☒

~~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		The NASDAQ Stock Market LLC

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of ~~April~~July 30, 2021, was ~~6,123,512.~~6,115,394.

Where Food Comes From, Inc.

Table of Contents

~~March 31,~~June 30, 2021

Part 1 - Financial Information

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1720

Item 4.	Controls and Procedures	2226

Part II - Other Information

Item 1.	Legal Proceedings	2327

Item 1A.	Risk Factors	2327

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2327

Item 6.	Exhibits	27


~~Item 6.~~	~~Exhibits~~	23

Where Food Comes From, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)	March 31, 2021			December 31, 2020
	(Unaudited)							June 30,			December 31,
								2021			2020
(Amounts in thousands, except per share amounts)								(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,996		$	4,374			$	5,297		$	4,374
Accounts receivable, net of allowance		1,866			2,508				1,991			2,508
Inventory									885			-
Prepaid expenses and other current assets		973			592				486			592
Total current assets		7,835			7,474				8,659			7,474
Property and equipment, net		1,689			1,616				1,542			1,616
Operating lease right-of-use assets, net		2,960			3,030				2,918			3,030
Investment in Progressive Beef		991			991				991			991
Intangible and other assets, net		2,858			2,948				2,766			2,948
Goodwill		2,946			2,946				2,946			2,946
Deferred tax assets, net		409			443				440			443
Total assets	$	19,688		$	19,448			$	20,262		$	19,448

Liabilities and Equity
Current liabilities:
Accounts payable	$	675		$	649			$	722		$	649
Accrued expenses and other current liabilities		908			599				1,118			599
Deferred revenue		1,335			1,132				1,653			1,132
Current portion of long term debt		-			463				-			463
Current portion of finance lease obligations		12			13				11			13
Current portion of operating lease obligations		275			268				297			268
Total current liabilities		3,205			3,124				3,801			3,124
Long term debt, net of current portion		-			572				-			572
Finance lease obligations, net of current portion		29			31				26			31
Operating lease obligation, net of current portion		3,186			3,257				3,127			3,257
Total liabilities		6,420			6,984				6,954			6,984

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; 6,475 (2021) and 6,456 (2020) shares issued, and 6,107 (2021) and 6,118 (2020) shares outstanding		6			6
Preferred stock, $0.001 par value; 5,000 shares authorized; NaN issued or outstanding							Preferred stock, $0.001 par value; 5,000 shares authorized; NaN issued or outstanding		-			-
Common stock, $0.001 par value; 95,000 shares authorized; 6,475 (2021) and 6,456 (2020) shares issued, and 6,095 (2021) and 6,118 (2020) shares outstanding									6			6
Additional paid-in-capital		11,677			11,612				11,710			11,612
Treasury stock of 367 (2021) and 338 (2020) shares		(3,113	)		(2,702	)
Treasury stock of 380 (2021) and 338 (2020) shares									(3,308	)		(2,702	)
Retained earnings		4,698			3,548				4,900			3,548
Total equity		13,268			12,464				13,308			12,464
Total liabilities and stockholders’ equity	$	19,688		$	19,448			$	20,262		$	19,448

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

Where Food Comes From, Inc.

Consolidated Statements of Operations

(Unaudited)


	Three months ended March 31,						Three months ended June 30,
(Amounts in thousands, except per share amounts)	2021			2020			2021			2020
Revenues:
Verification and certification service revenue	$	3,263		$	2,803		$	3,695		$	3,108
Product sales		724			725			964			796
Software license, maintenance and support services revenue		141			143
Software-related consulting service revenue		312			241
Software and related consulting revenue								482			512
Total revenues		4,440			3,912			5,141			4,416
Costs of revenues:
Costs of verification and certification services		1,793			1,534			2,132			1,516
Costs of products		457			502			648			501
Costs of software license, maintenance and support services		100			146
Costs of software-related consulting services		228			120
Costs of software and related consulting								352			299
Total costs of revenues		2,578			2,302			3,132			2,316
Gross profit		1,862			1,610			2,009			2,100
Selling, general and administrative expenses		1,773			1,964			1,727			1,631
Income/(loss) from operations		89			(354	)
Income from operations								282			469
Other income/(expense):
Dividend income from Progressive Beef		30			30			30			30
Other income, net		1			2			-			2
Loan forgiveness from Paycheck Protection Program		1,037			-			-			-
Gain on sale of assets		9			-			-			-
(Loss)/gain on foreign currency exchange		(2	)		3
Loss on foreign currency exchange								(5	)		(2	)
Interest expense		(3	)		(2	)		(1	)		(3	)
Income/(loss) before income taxes		1,161			(321	)
Income tax expense/(benefit)		11			(80	)
Net income/(loss)	$	1,150		$	(241	)
Income before income taxes								306			496
Income tax expense								104			145
Net income							$	202		$	351

Per share - net income/(loss):
Per share - net income:
Basic	$	0.19		$	(0.04	)	$	0.03		$	0.06
Diluted	$	0.19		$	(0.04	)	$	0.03		$	0.06

Weighted average number of common shares outstanding:
Basic		6,136			6,237			6,100			6,219
Diluted		6,231			6,237			6,186			6,258

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

Where Food Comes From, Inc.

Consolidated Statements of ~~Cash Flows~~Operations

(Unaudited)

Three months ended March 31,
(Amounts in thousands) 2021 2020

Operating activities:
Net income/(loss) $ 1,150 $ (241 )
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 202 233
Gain on sale of assets (9 ) -
Stock-based compensation expense 25 31
Deferred tax expense/(benefit) 34 (5 )
Bad debt expense 28 -
Forgiveness of note payable from Paycheck Protection Program (1,037 ) -
Changes in operating assets and liabilities, net of effect from acquisitions:
Accounts receivable 614 543
Short-term investments - (1 )
Prepaid expenses and other assets (381 ) 161
Accounts payable 26 (342 )
Accrued expenses and other current liabilities 309 (91 )
Deferred revenue 203 616
Right of use assets and liabilities, net 2 (8 )
Net cash provided by operating activities 1,166 896

Investing activities:
Acquisition of Postelsia Holdings, Ltd. - (300 )
Purchases of property, equipment and software development costs (170 ) (110 )
Net cash used in investing activities (170 ) (410 )

Financing activities:
Repayments of finance lease obligations (3 ) (2 )
Proceeds from stock option exercise 40 -
Stock repurchase under Stock Buyback Plan (411 ) (158 )
Net cash used in financing activities (374 ) (160 )
Net change in cash 622 326
Cash at beginning of period 4,374 2,638
Cash at end of period $ 4,996 $ 2,964


	Six months ended June 30,
(Amounts in thousands, except per share amounts)	2021			2020
Revenues:
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
Costs of revenues:
Costs of verification and certification services		3,925			3,050
Costs of products		1,105			1,003
Costs of software and related consulting		680			565
Total costs of revenues		5,710			4,618
Gross profit		3,871			3,710
Selling, general and administrative expenses		3,500			3,595
Income from operations		371			115
Other income/(expense):
Dividend income from Progressive Beef		60			60
Other income, net		1			4
Loan forgiveness from Paycheck Protection Program		1,037			-
(Loss)/gain on foreign currency exchange		(7	)		1
Gain on sale of assets		9			-
Interest expense		(4	)		(5	)
Income before income taxes		1,467			175
Income tax expense		115			65
Net income	$	1,352		$	110

Per share - net income:
Basic	$	0.22		$	0.02
Diluted	$	0.22		$	0.02

Weighted average number of common shares outstanding:
Basic		6,151			6,228
Diluted		6,241			6,271

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

Where Food Comes From, Inc.

Consolidated ~~Statement~~Statements of ~~Equity~~Cash Flows

(Unaudited)

Additional
Common Stock Paid-in Treasury Retained
(Amounts in thousands) Shares Amount Capital Stock Earnings Total

Balance at December 31, 2019 (1) 6,245 $ 6 $ 11,445 $ (1,665 ) $ 2,163 $ 11,949
Stock-based compensation expense - - 31 - - 31
Repurchase of common shares under Stock Buyback Plan (21 ) - - (158 ) - (158 )
Net loss - - - - (241 ) (241 )
Balance at March 31, 2020 6,224 $ 6 $ 11,476 $ (1,823 ) $ 1,922 $ 11,581

Balance at December 31, 2020 6,118 $ 6 $ 11,612 $ (2,702 ) $ 3,548 $ 12,464
Stock-based compensation expense - - 25 - - 25
Stock options exercised 18 - 40 - - 40
Repurchase of common shares under Stock Buyback Plan (29 ) - - (411 ) - (411 )
Net income - - - - 1,150 1,150
Balance at March 31, 2021 6,107 $ 6 $ 11,677 $ (3,113 ) $ 4,698 $ 13,268


	Six months ended June 30,
(Amounts in thousands)	2021			2020
Operating activities:
Net income	$	1,352		$	110
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		401			478
Gain on sale of assets		(9	)		-
Stock-based compensation expense		54			55
Deferred tax expense		3			29
Bad debt expense		40			-
Forgiveness of note payable from Paycheck Protection Program		(1,037	)		-
Changes in operating assets and liabilities, net of effect from acquisitions:
Accounts receivable		477			745
Short-term investments		-			(3	)
Inventory		(885	)		-
Prepaid expenses and other assets		106			99
Accounts payable		73			(243	)
Accrued expenses and other current liabilities		519			66
Deferred revenue		521			409
Right of use assets and liabilities, net		5			3
Net cash provided by operating activities		1,620			1,748

Investing activities:
Acquisition of Postelsia Holdings, Ltd.		-			(300	)
Purchases of property, equipment and software development costs		(128	)		(329	)
Net cash used in investing activities		(128	)		(629	)

Financing activities:
Proceeds from long term debt		-			1,030
Repayments of finance lease obligations		(7	)		(4	)
Proceeds from stock option exercise		44			3
Stock repurchase under Stock Buyback Plan		(606	)		(269	)
Net cash (used in) / provided by financing activities		(569	)		760
Net change in cash		923			1,879
Cash at beginning of period		4,374			2,638
Cash at end of period	$	5,297		$	4,517

~~(1) The Balance at December 31, 2019 has been updated to reflect the impact of the 1-for-4 reverse stock split effective December 1, 2020.~~

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

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, 2020		6,118		$	6	$	11,612	$	(2,702	)	$	3,548	$	12,464
Stock-based compensation expense		-			-		25		-			-		25
Stock options exercised		18			-		40		-			-		40
Repurchase of common shares under Stock Buyback Plan		(29	)		-		-		(411	)		-		(411	)
Net income		-			-		-		-			1,150		1,150
Balance at March 31, 2021		6,107		$	6	$	11,677	$	(3,113	)	$	4,698	$	13,268

Stock-based compensation expense		-			-		29		-			-		29
Stock options exercised		1			-		4		-			-		4
Repurchase of common shares under Stock Buyback Plan		(13	)		-		-		(195	)		-		(195	)
Net income		-			-		-		-			202		202
Balance at June 30, 2021		6,095		$	6	$	11,710	$	(3,308	)	$	4,900	$	13,308

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

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, 2019 (1)		6,245		$	6	$	11,445	$	(1,665	)	$	2,163		$	11,949
Stock-based compensation expense		-			-		31		-			-			31
Stock options exercised
Stock options exercised, shares
Repurchase of common shares under Stock Buyback Plan		(21	)		-		-		(158	)		-			(158	)
Net loss		-			-		-		-			(241	)		(241	)
Balance at March 31, 2020		6,224		$	6	$	11,476	$	(1,823	)	$	1,922		$	11,581

Stock-based compensation expense		-			-		24		-			-			24
Stock options exercised		3			-		3		-			-			3
Repurchase of common shares under Stock Buyback Plan		(16	)		-		-		(111	)		-			(111	)
Net income		-			-		-		-			351			351
Balance at June 30, 2020		6,211		$	6	$	11,503	$	(1,934	)	$	2,273		$	11,848

(1)

The balance at December 31, 2019 has been updated to reflect the impact of the 1-for-4 reverse stock split effective December 1, 2020.

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

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 support our verification business and 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, Where Food Comes From Organic, Inc. (“WFCFO”), 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, 2020, included in our Form 10-K filed on February 18, 2021. 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~~income 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 and six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of the results to be expected for any other interim period of any future year.

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Except as specifically indicated, all information in this Quarterly Report on Form 10-Q has been retroactively adjusted to give effect to a 1-for-4 reverse stock split that was effective on December 1, 2020.

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.

Note 2 – Basic and Diluted Net Income / (Loss) per Share

Basic net income / (loss) per share was computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and restricted stock awards are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

The following is a reconciliation of the share data used in the basic and diluted income / (loss) per share computations (amounts in thousands):

Schedule of Reconciliation of Basic and Diluted Income Per Share Computations


	Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
(in thousands)	2021		2020		2021		2020		2021		2020
Basic:
Weighted average shares outstanding		6,136		6,237		6,100		6,219		6,151		6,228

Diluted:
Weighted average shares outstanding		6,136		6,237		6,100		6,219		6,151		6,228
Weighted average effects of dilutive securities		95		-		86		39		90		43
Total		6,231		6,237		6,186		6,258		6,241		6,271

Antidilutive securities:		-		52		17		70		17		66

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.

810

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 3 - Investment in Progressive Beef, LLC

For the three months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~ 2020, the Company received dividend income from Progressive Beef of ~~$30,000~~$30,000, respectively, representing a distribution of their earnings. For the six months ended June 30, 2021 and 2020, the Company received dividend income totaling $60,000, respectively. The income is reflected within the “Other income/(expense)” section of the Company’s Consolidated Statement of Income for the three and six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~ 2020.

Note 4 – Intangible and Other Assets

The following table summarizes our intangible and other assets (amounts in thousands, except useful life):

Schedule of Intangible and Other Assets

	March 31,		December 31,		Estimated	June 30,		December 31,		Estimated
	2021		2020		Useful Life	2021		2020		Useful Life
Intangible assets subject to amortization:
Tradenames and trademarks	$	417	$	417	2.5 - 8.0 years	$	417	$	417		2.5 - 8.0 years
Accreditations		85		85	5.0 years		75		85		5.0 years
Customer relationships		3,664		3,664	3.0 - 15.0 years		3,664		3,664		3.0 - 15.0 years
Patents		970		970	4.0 years		970		970		4.0 years
Non-compete agreements		121		121	5.0 years		121		121		5.0 years
		5,257		5,257			5,247		5,257
Less accumulated amortization		2,877		2,795			2,969		2,795
		2,380		2,462			2,278		2,462
Tradenames/trademarks (not subject to amortization)		465		465			465		465
		2,845		2,927			2,743		2,927
Other assets		13		21			23		21
Intangible and other assets:	$	2,858	$	2,948		$	2,766	$	2,948

Note 5 – Accrued Expenses and Other Current Liabilities

The following table summarizes our accrued expenses and other current liabilities as of (amounts in thousands):

Schedule of Accrued Expenses and Other Current Liabilities

	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020

Income and sales taxes payable	$	136	$	168	$	32	$	168
Payroll related accruals		416		271		709		271
Customer deposits		68		31		28		31
Professional fees and other expenses		288		129		349		129
	$	908	$	599
Accrued expenses and other current liabilities					$	1,118	$	599

911

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 6 – Notes Payable

Long Term Debt

Schedule of Long Term Debt

	March 31,		December 31,			June 30,		December 31,
	2021		2020			2021		2020
(In thousands)
Paycheck Protection Program Loan	$	-	$	1,035		$	-	$	1,035
Less current portion of notes payable and other long-term debt		-		(463	)		-		(463	)
Notes payable and other long-term debt	$	-	$	572		$	-	$	572

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allocated ~~$350~~ $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. The Company received notification the loan and accrued interest was forgiven on March 4, 2021.

Unison Revolving Line of Credit

The Company has a revolving line of credit (“LOC”) agreement which matures April 12, ~~2022.~~2022. The LOC provides for ~~$75,080~~$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,~~June 30, 2021 and December 31, 2020, the effective interest rate for both periods was 4.75%. The LOC is collateralized by all the business assets of ICS. As of ~~March 31,~~June 30, 2021, and December 31, 2020, there were no amounts outstanding under this LOC.

Note 7 – 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):

Schedule of Stock-based Compensation Expense

	Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020		2021		2020
Stock options	$	24	$	30	$	29	$	23	$	53	$	53
Restricted stock awards		1		1		-		1		1		2
Total	$	25	$	31	$	29	$	24	$	54	$	55

During the three months ended ~~March 31,~~June 30, 2021, ~~no stock options were awarded. During the three months ended March 31, 2020,~~ the Company awarded stock options to purchase ~~5,000~~17,000 shares of the Company’s common stock at an exercise price of ~~$7.24~~$14.77 per share to employees of the Company. NaN other stock options were awarded during the six months ended June 30, 2021. NaN stock options were awarded during the three months ended June 30, 2020. During the six months ended June 30, 2020, the Company awarded stock options to purchase 5,000 shares of the Company’s common stock at an exercise price of $7.24 per share to employees of the Company (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020).

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions (all share amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020):

Schedule of Estimated Fair Value of Stock Options

	Three months ended March 31,					Six months ended June 30,
	2021		2020			2021			2020
Number of options awarded to purchase common shares		0		5,000			17,000			5,000
Risk-free interest rate		N/A		1.56	%		0.82	%		1.56	%
Expected volatility		N/A		97.0	%		70.10	%		97.3	%
Assumed dividend yield		N/A		N/A			N/A			N/A
Assumed dividend yield							-			-
Expected life of options from the date of grant		N/A		9.9 years			9.8 years			9.8 years

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

Schedule of Unrecognized Compensation Cost from Unvested Awards

Years ended December 31st:	Unvested stock options		Unvested restricted stock awards		Total unrecognized compensation expense		Unvested stock options		Unvested restricted stock awards		Total unrecognized compensation expense
2021 (remaining nine months)		49		-		49
2021 (remaining six months)							$	79	$	-	$	79
2022		20		-		20		98		-		98
2023		4		-		4		40		-		40
2024		-		-		-		11		-		11
	$	73	$	-	$	73	$	228	$	-	$	228

Equity Incentive Plans

Our 2006 Equity Incentive Plan (the “2006 Plan”) and 2016 Equity Incentive Plan (the “2016 Plan,” and together with the 2006 Plan, the “Plans”) provide for the issuance of stock-based awards to employees, officers, directors and consultants. The Plans permit 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.

1113

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Stock Option Activity

Stock option activity under our Equity Incentive Plans is summarized as follows (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020):

Schedule of Stock Option Activity

								Weighted avg.											Weighted avg.
				Weighted avg.		Weighted avg.		remaining							Weighted avg.		Weighted avg.		remaining
	Number of			exercise price		grant date fair		contractual life		Aggregate		Number of			exercise price		grant date fair		contractual life		Aggregate
	awards			per share		value per share		(in years)		intrinsic value		awards			per share		value per share		(in years)		intrinsic value

Outstanding, December 31, 2020		105,086		$	6.25	$	6.06		5.38	$	814,090		105,086		$	6.25	$	6.06		5.38	$	814,090
Granted		-		$	-	$	-		-				17,000		$	14.77	$	10.90		10.00
Exercised		(17,195	)	$	2.31	$	2.25		1.27				(17,763	)	$	2.30	$	2.92		1.74
Expired/Forfeited		(1,343	)	$	7.11	$	6.65		-				(1,988	)	$	7.17	$	6.82		7.28
Outstanding, March 31, 2021		86,548		$	7.02	$	6.81		5.86	$	560,478
Exercisable, March 31, 2021		69,526		$	6.93	$	6.80		5.30	$	456,726
Unvested, March 31, 2021		17,022		$	7.40	$	7.16		8.11	$	103,752
Outstanding, June 30, 2021													102,335		$	8.31	$	7.49		6.33	$	732,909
Exercisable, June 30, 2021													68,657		$	6.93	$	6.80		5.04	$	586,568
Unvested, June 30, 2021													33,678		$	11.12	$	8.89		8.95	$	146,341

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,~~June 30, 2021 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,~~June 30, 2021.

Restricted Stock Activity

Restricted stock activity under our Equity Incentive Plans is summarized as follows (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020):

Schedule of Restricted Stock Activity Under Equity Incentive Plan

				Weighted avg.					Weighted avg.
	Number of			grant date		Number of			grant date
	options			fair value		options			fair value
Non-vested restricted shares, December 31, 2020		1,250		$	10.20		1,250		$	10.20
Granted		-		$	-		-		$	-
Vested		(1,250	)	$	10.20		(1,250	)	$	10.20
Forfeited		-		$	-		-		$	-
Non-vested restricted shares, March 31, 2021		-		$	-
Non-vested restricted shares, June 30, 2021							-		$	-

Note 8 – 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 and six months ended ~~March 31,~~June 30, 2021 we recorded an income tax expense of approximately ~~$11,000,~~$104,000 and $115,000, respectively, compared to income tax ~~benefit~~expense of ~~$80,000~~$145,000 and $65,000 for the same 2020 ~~period.~~periods. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2021 is favorably impacted by the non-taxability of the PPP loan forgiveness income.

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 9 - Revenue Recognition

Disaggregation of Revenue

We have identified ~~four~~three 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~~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, 2021 Three months ended March 31, 2020
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 $ 3,263 $ - $ - $ 3,263 $ 2,803 $ - $ - $ 2,803
Product sales 724 - - 724 725 - - 725
Software license, maintenance and support services revenue - 141 - 141 - 233 (90 ) 143
Software-related consulting service revenue - 312 - 312 - 265 (24 ) 241
Total revenues $ 3,987 $ 453 $ - $ 4,440 $ 3,528 $ 498 $ (114 ) $ 3,912

Schedule of Revenues Disaggregated by Revenue

	Three months ended June 30, 2021								Three months ended June 30, 2020
	Verification and Certification Segment		Software and Related Consulting Segment		Eliminations and Other		Consolidated		Verification and Certification Segment		Software and Related Consulting Segment		Eliminations and Other		Consolidated
Verification and certification service revenue	$	3,695	$	-	$	-	$	3,695	$	3,108	$	-	$	-	$	3,108
Product sales		964		-		-		964		796		-		-		796
Software and related consulting revenue		-		482		-		482		-		512		-		512
Total revenues	$	4,659	$	482	$	-	$	5,141	$	3,904	$	512	$	-	$	4,416

	Six months ended June 30, 2021								Six months ended June 30, 2020
	Verification and Certification Segment		Software and Related Consulting Segment		Eliminations and Other		Consolidated		Verification and Certification Segment		Software and Related Consulting Segment		Eliminations and Other			Consolidated
Verification and certification service revenue	$	6,958	$	-	$	-	$	6,958	$	5,911	$	-	$	-		$	5,911
Product sales		1,688		-		-		1,688		1,521		-		-			1,521
Software and related consulting revenue		-		935		-		935		-		1,010		(114	)		896
Total revenues	$	8,646	$	935	$	-	$	9,581	$	7,432	$	1,010	$	(114	)	$	8,328

Contract Balances

As of ~~March 31,~~June 30, 2021, and December 31, 2020, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately ~~$1.9~~$2.0 and ~~$2.5~~$2.5 million, respectively.

As of ~~March 31,~~June 30, 2021, and December 31, 2020, deferred revenue from contracts with customers was approximately ~~$1.3~~$1.7 and ~~$1.1~~$1.1 million, respectively. The balance of the contract liabilities at ~~March 31,~~June 30, 2021 and December 31, 2020 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~~six month period ended ~~March 31,~~June 30, 2021 ~~(amounts~~(amounts in thousands):

Schedule of Changes in Contract Liabilities


Deferred revenue:
Unearned revenue January 1, 2021	$	1,132		$	1,132
Unearned billings		1,604			2,581
Revenue recognized		(1,401	)		(2,060	)
Unearned revenue March 31, 2021	$	1,335
Unearned revenue June 30, 2021				$	1,653

1315

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 10 – Leases

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

Schedule of Lease Expense


	Three months ended				Three months ended				Six months ended
	March 31, 2021		March 31, 2020		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease cost	$	116	$	116	$	116	$	116	$	233	$	232
Finance lease cost
Amortization of assets		2		2		3		2		5		4
Interest on finance lease obligations		1		1		1		2		2		3
Total net lease cost	$	119	$	119	$	120	$	120	$	240	$	239

Included in the table above, ~~is $0.1 million~~ for the three and six months ended ~~March 31,~~June 30, 2021, is $0.1 and $0.2 million, respectively, 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):

Schedule of Supplemental Balance Sheet Information Related to Leases

													June 30, 2021						December 31, 2020
	March 31, 2021						December 31, 2020						Related Party		Other		Total		Related Party		Other		Total
Operating leases:	Related Party		Other		Total		Related Party		Other		Total
Operating lease ROU assets	$	2,709	$	217	$	2,926	$	2,755	$	238	$	2,993	$	2,662	$	226	$	2,888	$	2,755	$	238	$	2,993

Current operating lease liabilities	$	184	$	91	$	275	$	179	$	89	$	268	$	190	$	107	$	297	$	179	$	89	$	268
Noncurrent operating lease liabilities		3,032		154		3,186		3,079		178		3,257		2,983		144		3,127		3,079		178		3,257
Total operating lease liabilities	$	3,216	$	245	$	3,461	$	3,258	$	267	$	3,525	$	3,173	$	251	$	3,424	$	3,258	$	267	$	3,525

Finance leases: March 31, 2021 December 31, 2020
Property and equipment, at cost $ 67 $ 67
Accumulated amortization (33 ) (30 )
Property and equipment, net $ 34 $ 37

Current obligations of finance leases $ 12 $ 13
Finance leases, net of current obligations 29 31
Total finance lease liabilities $ 41 $ 44

Weighted average remaining lease term (in years):
Operating leases 9.8 10.0
Finance leases 3.6 3.7

Weighted average discount rate:
Operating leases 5.8 % 5.8 %
Finance leases 12.6 % 13.0 %

~~Where Food Comes From, Inc.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

	June 30, 2021			December 31, 2020
Finance leases:
Property and equipment, at cost	$	51		$	67
Accumulated amortization		(21	)		(30	)
Property and equipment, net	$	30		$	37

Current obligations of finance leases	$	11		$	13
Finance leases, net of current obligations		26			31
Total finance lease liabilities	$	37		$	44

Weighted average remaining lease term (in years):
Operating leases		9.5			10.0
Finance leases		3.5			3.7

Weighted average discount rate:
Operating leases		5.8	%		5.8	%
Finance leases		12.1	%		13.0	%

Supplemental cash flow and other information related to leases was as follows (amounts in thousands):

Schedule of Supplemental Cash Flow Information Related to Leases


	Three months ended				Three months ended				Six months ended
	March 31, 2021		March 31, 2020		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	114	$	111	$	116	$	111	$	230	$	222
Operating cash flows from finance leases	$	1	$	1	$	1	$	2	$	2	$	3
Financing cash flows from finance leases	$	3	$	2	$	2	$	2	$	5	$	4

ROU assets obtained in exchange for lease liabilities:
Operating leases	$	3,531	$	3,507	$	3,057	$	3,507	$	3,057	$	3,507

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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

Schedule of Maturities of Operating Lease and Finance Lease Liabilities

Years Ending December 31st,	Operating Leases			Finance Leases			Operating Leases			Finance Leases
2021 (nine remaining months)	$	347		$	13
2021 (six remaining months)							$	241		$	7
2022		466			15			482			15
2023		461			10			468			10
2024		407			5			407			5
2025		405			5			405			5
Thereafter		2,497			-			2,496			-
Total lease payments		4,583			48			4,499			42
Less amount representing interest		(1,122	)		(7	)		(1,075	)		(5	)
Total lease obligations		3,461			41			3,424			37
Less current portion		(275	)		(12	)		(297	)		(11	)
Long-term lease obligations	$	3,186		$	29		$	3,127		$	26

Note 11 – 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 12 - 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~~1 verification and certification reportable segment. The operating segments included in the aggregated verification and certification segment include IMI Global, WFCFO 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 Postelsia, is the sole operating segment under the software ~~sales~~ and related consulting reportable segment. This segment includes software license, maintenance, support and software-related consulting service revenues.

~~Where Food Comes From, Inc.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

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.

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):

Schedule of Operating Segments

	Three months ended March 31, 2021											Three months ended March 31, 2020												Three months ended June 30, 2021											Three months ended June 30, 2020
	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			Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals			Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals
Assets:
Goodwill	$	1,947	$	999		$	-		$	2,946		$	1,133		$	1,813		$	-		$	2,946		$	1,947	$	999		$	-		$	2,946		$	1,133	$	1,813		$	-		$	2,946
All other assets, net		17,545		2,891			(3,694	)		16,742			15,866			3,711			(4,530	)		15,047			17,327		3,082			(3,093	)		17,316			17,463		3,474			(4,604	)		16,333
Total assets	$	19,492	$	3,890		$	(3,694	)	$	19,688		$	16,999		$	5,524		$	(4,530	)	$	17,993		$	19,274	$	4,081		$	(3,093	)	$	20,262		$	18,596	$	5,287		$	(4,604	)	$	19,279

Revenues:
Verification and certification service revenue	$	3,263	$	-		$	-		$	3,263		$	2,803		$	-		$	-		$	2,803		$	3,695	$	-		$	-		$	3,695		$	3,108	$	-		$	-		$	3,108
Product sales		724		-			-			724			725			-			-			725			964		-			-			964			796		-			-			796
Software license, maintenance and support services revenue		-		141			-			141			-			233			(90	)		143
Software-related consulting service revenue		-		312			-			312			-			265			(24	)		241
Software and related consulting revenue																									-		482			-			482			-		512			-			512
Total revenues	$	3,987	$	453		$	-		$	4,440		$	3,528		$	498		$	(114	)	$	3,912		$	4,659	$	482		$	-		$	5,141		$	3,904	$	512		$	-		$	4,416
Costs of revenues:
Costs of verification and certification services		1,793		-			-			1,793			1,624			-			(90	)		1,534			2,132		-			-			2,132			1,516		-			-			1,516
Costs of products		457		-			-			457			502			-			-			502			648		-			-			648			501		-			-			501
Costs of software license, maintenance and support services		-		100			-			100			-			146			-			146
Costs of software-related consulting services		-		228			-			228			-			120			-			120
Costs of software and related consulting																									-		352			-			352			-		299			-			299
Total costs of revenues		2,250		328			-			2,578			2,126			266			(90	)		2,302			2,780		352			-			3,132			2,017		299			-			2,316
Gross profit		1,737		125			-			1,862			1,402			232			(24	)		1,610			1,879		130			-			2,009			1,887		213			-			2,100
Depreciation & amortization		151		51			-			202			88			146			-			234			148		51			-			199			112		132			-			244
Other operating expenses		1,479		92			-			1,571			1,537			217			(24	)		1,730			1,442		86			-			1,528			1,266		121			-			1,387
Segment operating income/(loss)	$	107	$	(18	)	$	-		$	89		$	(223	)	$	(131	)	$	-		$	(354	)	$	289	$	(7	)	$	-		$	282		$	509	$	(40	)	$	-		$	469
Other items to reconcile segment operating income (loss) to net income/(loss):
Other income		35		-			1,037			1,072			30			3			-			33			29		(5	)		-			24			29		(2	)		-			27
Income tax (expense)/benefit		-		-			(11	)		(11	)		-			-			80			80			-		(5	)		(99	)		(104	)		-		-			(145	)		(145	)
Net income/(loss)	$	142	$	(18	)	$	1,026		$	1,150		$	(193	)	$	(128	)	$	80		$	(241	)	$	318	$	(17	)	$	(99	)	$	202		$	538	$	(42	)	$	(145	)	$	351

	Six months ended June 30, 2021											Six months ended June 30, 2020
	Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals			Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals
Assets:
Goodwill	$	1,947	$	999		$	-		$	2,946		$	1,133	$	1,813		$	-		$	2,946
All other assets, net		17,327		3,082			(3,093	)		17,316			17,463		3,474			(4,604	)		16,333
Total assets		19,274		4,081			(3,093	)		20,262			18,596		5,287			(4,604	)		19,279

Revenues:
Verification and certification service revenue	$	6,958	$	-		$	-		$	6,958		$	5,911	$	-		$	-		$	5,911
Product sales		1,688		-			-			1,688			1,521		-			-			1,521
Software and related consulting revenue		-		935			-			935			-		1,010			(114	)		896
Total revenues	$	8,646	$	935		$	-		$	9,581		$	7,432	$	1,010		$	(114	)	$	8,328
Costs of revenues:
Costs of verification and certification services		3,925		-			-			3,925			3,140		-			(90	)		3,050
Costs of products		1,105		-			-			1,105			1,003		-			-			1,003
Costs of software and related consulting		-		680			-			680			-		565			-			565
Total costs of revenues		5,030		680			-			5,710			4,143		565			(90	)		4,618
Gross profit		3,616		255			-			3,871			3,289		445			(24	)		3,710
Depreciation & amortization		300		101			-			401			200		278			-			478
Other operating expenses		2,920		179			-			3,099			2,803		338			(24	)		3,117
Segment operating income/(loss)	$	396	$	(25	)	$	-		$	371		$	286	$	(171	)	$	-		$	115
Other items to reconcile segment operating income (loss) to net income/(loss):
Other income		66		(7	)		1,037			1,096			59		1			-			60
Income tax (expense)/benefit		-		(5	)		(110	)		(115	)		-		-			(65	)		(65	)
Net income/(loss)	$	462	$	(37	)	$	927		$	1,352		$	345	$	(170	)	$	(65	)	$	110

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 13 – Supplemental Cash Flow Information

Schedule of Supplemental Cash Flow Information


	Three months ended March 31,				Six months ended June 30,
(Amounts in thousands)	2021		2020		2021		2020
Cash paid during the year:
Interest expense	$	1	$	2	$	1	$	5
Income taxes	$	-	$	-	$	345	$	10

Note 14 – Subsequent Events

Where Food Comes From, Inc. announced on July 1, 2021, its Board of Directors declared a special cash dividend totaling $0.15 per common share. This one-time special dividend will be paid to stockholders of record as of the close of business on July 27, 2021, with a payment date of August 16, 2021.

The Company has had no other material, significant or unusual transactions or events from the financial statement date through the issuance of the financial statements.

1619

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, 2020. 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, WFCFO, 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; 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 support our verification business and 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 NASDAQ Capital Market 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 over 50 programs and organizations. 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 allowing a majority of employees to 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.

Seasonality

Liquidity and Capital Resources

At ~~March 31,~~June 30, 2021, we had cash, cash equivalents ~~and certificates of deposits (classified as short-term and long-term investments)~~ of approximately ~~$5.0~~$5.3 million compared to approximately $4.4 million at December 31, 2020. Our working capital at ~~March 31,~~June 30, 2021 was approximately ~~$4.6~~$4.9 million compared to $4.4 million at December 31, 2020.

Net cash provided by operating activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was approximately ~~$1.2~~$1.6 million compared to ~~$0.9~~$1.7 million during the same period in 2020. Net cash provided by operating activities is driven by our net income and adjusted by non-cash items. Non-cash adjustments primarily include depreciation, amortization of intangible assets, stock-based compensation expense, forgiveness of Paycheck Protection Program loan, and deferred taxes. Fluctuations are primarily due to operating performance offset by the timing of cash receipts and cash disbursements. The increase in cash provided by operating activities for the periods ending ~~March 31,~~June 30, 2021 and 2020 was primarily driven by a change in accounts receivable, accounts payable, inventory and deferred revenue.

Net cash used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021, was approximately ~~$0.2~~$0.1 million compared to ~~$0.4~~$0.6 million in the 2020 period. Net cash used in the period ending ~~March 31,~~June 30, 2021 was primarily for the ~~further development~~purchase of ~~internal use software.~~a vehicle and equipment. Net cash used in the ~~March 31,~~June 30, 2020 period was ~~primarily~~ attributable to the acquisition of Postelsia Holdings, Ltd for $0.3 million and investment in software of $0.3 million.

Net cash used in financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was approximately ~~$0.4~~$0.6 million compared to ~~$0.2~~net cash provided by financing activities of $0.8 million in the 2020 period. Cash used for the period ending ~~March 31,~~June 30, 2021, ~~and March 31, 2020,~~ was primarily due to the repurchase of common shares under the Stock Buyback Plan. Cash provided for the period ending June 30, 2020, was primarily from proceeds from the PPP loan of $1.0 million, offset by $0.3 million for the repurchase of common shares under the Stock Buyback Plan.

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, overall improvement in our performance, and our ability to obtain additional financing, are adequate to finance current operations as well as the repayment of current debt obligations. We are not aware of any other event or trend that would negatively affect our liquidity. In the event such a trend develops, we believe that there are sufficient financing avenues available to us and from 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.

Our plan for continued growth is primarily based on diversification in our product offerings within national and international markets, as well as, potential acquisitions. We believe that there are significant growth opportunities available to us because of growing consumer awareness and demand on a national level. Internationally, a quality verification program is often the only way to overcome import or export restrictions.

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,~~June 30, 2021, and December 31, 2020, the effective interest rate was ~~4.75% and~~ 4.75%, respectively. The LOC is collateralized by all the business assets of Where Food Comes From Organic, Inc. (“WFCFO”). As of ~~March 31,~~June 30, 2021, and December 31, 2020, 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 Company received notification the loan and accrued interest amount was forgiven on March 4, 2021.

Off-Balance Sheet Arrangements

As of ~~March 31,~~June 30, 2021, we had no off-balance sheet arrangements of any type.

1922

RESULTS OF OPERATIONS

Three and six months ended ~~March 31,~~June 30, 2021 compared to the same ~~period~~periods in fiscal year 2020

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

	Three months ended June 30, 2021											Three months ended June 30, 2020
	Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals			Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals
Assets:
Goodwill	$	1,947	$	999		$	-		$	2,946		$	1,133	$	1,813		$	-		$	2,946
All other assets, net		17,327		3,082			(3,093	)		17,316			17,463		3,474			(4,604	)		16,333
Total assets	$	19,274	$	4,081		$	(3,093	)	$	20,262		$	18,596	$	5,287		$	(4,604	)	$	19,279

Revenues:
Verification and certification service revenue	$	3,695	$	-		$	-		$	3,695		$	3,108	$	-		$	-		$	3,108
Product sales		964		-			-			964			796		-			-			796
Software and related consulting revenue		-		482			-			482			-		512			-			512
Total revenues	$	4,659	$	482		$	-		$	5,141		$	3,904	$	512		$	-		$	4,416
Costs of revenues:
Costs of verification and certification services		2,132		-			-			2,132			1,516		-			-			1,516
Costs of products		648		-			-			648			501		-			-			501
Costs of software and related consulting		-		352			-			352			-		299			-			299
Total costs of revenues		2,780		352			-			3,132			2,017		299			-			2,316
Gross profit		1,879		130			-			2,009			1,887		213			-			2,100
Depreciation & amortization		148		51			-			199			112		132			-			244
Other operating expenses		1,442		86			-			1,528			1,266		121			-			1,387
Segment operating income/(loss)	$	289	$	(7	)	$	-		$	282		$	509	$	(40	)	$	-		$	469
Other items to reconcile segment operating income (loss) to net income/(loss):
Other income		29		(5	)		-			24			29		(2	)		-			27
Income tax (expense)/benefit		-		(5	)		(99	)		(104	)		-		-			(145	)		(145	)
Net income/(loss)	$	318	$	(17	)	$	(99	)	$	202		$	538	$	(42	)	$	(145	)	$	351

	Three months ended March 31, 2021											Three months ended March 31, 2020												Six months ended June 30, 2021											Six months ended June 30, 2020
	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			Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals			Verification and Certification Segment		Software and Related Consulting Segment			Eliminations and Other			Consolidated Totals
Assets:
Goodwill	$	1,947	$	999		$	-		$	2,946		$	1,133		$	1,813		$	-		$	2,946		$	1,947	$	999		$	-		$	2,946		$	1,133	$	1,813		$	-		$	2,946
All other assets, net		17,545		2,891			(3,694	)		16,742			15,866			3,711			(4,530	)		15,047			17,327		3,082			(3,093	)		17,316			17,463		3,474			(4,604	)		16,333
Total assets	$	19,492	$	3,890		$	(3,694	)	$	19,688		$	16,999		$	5,524		$	(4,530	)	$	17,993			19,274		4,081			(3,093	)		20,262			18,596		5,287			(4,604	)		19,279

Revenues:
Verification and certification service revenue	$	3,263	$	-		$	-		$	3,263		$	2,803		$	-		$	-		$	2,803		$	6,958	$	-		$	-		$	6,958		$	5,911	$	-		$	-		$	5,911
Product sales		724		-			-			724			725			-			-			725			1,688		-			-			1,688			1,521		-			-			1,521
Software license, maintenance and support services revenue		-		141			-			141			-			233			(90	)		143
Software-related consulting service revenue		-		312			-			312			-			265			(24	)		241
Software and related consulting revenue																									-		935			-			935			-		1,010			(114	)		896
Total revenues	$	3,987	$	453		$	-		$	4,440		$	3,528		$	498		$	(114	)	$	3,912		$	8,646	$	935		$	-		$	9,581		$	7,432	$	1,010		$	(114	)	$	8,328
Costs of revenues:
Costs of verification and certification services		1,793		-			-			1,793			1,624			-			(90	)		1,534			3,925		-			-			3,925			3,140		-			(90	)		3,050
Costs of products		457		-			-			457			502			-			-			502			1,105		-			-			1,105			1,003		-			-			1,003
Costs of software license, maintenance and support services		-		100			-			100			-			146			-			146
Costs of software-related consulting services		-		228			-			228			-			120			-			120
Costs of software and related consulting																									-		680			-			680			-		565			-			565
Total costs of revenues		2,250		328			-			2,578			2,126			266			(90	)		2,302			5,030		680			-			5,710			4,143		565			(90	)		4,618
Gross profit		1,737		125			-			1,862			1,402			232			(24	)		1,610			3,616		255			-			3,871			3,289		445			(24	)		3,710
Depreciation & amortization		151		51			-			202			88			146			-			234			300		101			-			401			200		278			-			478
Other operating expenses		1,479		92			-			1,571			1,537			217			(24	)		1,730			2,920		179			-			3,099			2,803		338			(24	)		3,117
Segment operating income/(loss)	$	107	$	(18	)	$	-		$	89		$	(223	)	$	(131	)	$	-		$	(354	)	$	396	$	(25	)	$	-		$	371		$	286	$	(171	)	$	-		$	115
Other items to reconcile segment operating income (loss) to net income/(loss):
Other income		35		-			1,037			1,072			30			3			-			33			66		(7	)		1,037			1,096			59		1			-			60
Income tax (expense)/benefit		-		-			(11	)		(11	)		-			-			80			80			-		(5	)		(110	)		(115	)		-		-			(65	)		(65	)
Net income/(loss)	$	142	$	(18	)	$	1,026		$	1,150		$	(193	)	$	(128	)	$	80		$	(241	)	$	462	$	(37	)	$	927		$	1,352		$	345	$	(170	)	$	(65	)	$	110

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 and six months ended ~~March 31,~~June 30, 2021 increased ~~16.4%~~18.9% and 17.7%, respectively, compared to 2020, primarily due to increased customer demand for our product offerings.

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 and six months ended ~~March 31,~~June 30, 2021 ~~were relatively flat compared~~increased 21.1% and 11.0%, respectively. Overall, our product sales have increased primarily in response to the ~~same period in 2020.~~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 and six months ended ~~March 31,~~June 30, 2021 were approximately ~~$1.8~~$2.8 million and $5.0 million, respectively, compared to approximately ~~$1.5~~$2.0 million and $4.1 million (including eliminations), respectively, for the same ~~period~~periods in 2020. Gross margin for the three and six months ended ~~March 31,~~June 30, 2021 ~~was 43.6%~~decreased to 40.3% and 41.9%, respectively, compared to ~~37.2%~~48.3% and 43.0% (including eliminations), respectively, in 2020 primarily due to ~~larger revenue base and the three months ended March 31,~~change in product mix of our offerings which included new customers, new offerings, returned demand for audits that were delayed in 2020 ~~revenue base was negatively impacted~~ due to ~~COVID-19.~~COVID-19 social distancing measures and additional compensation expense incurred to support the increased activity. 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 and six months ended ~~March 31,~~June 30, 2021 ~~slightly decreased~~increased by approximately ~~3.8%~~13.9% and 5.0%, respectively, compared to the same three and six month ~~period~~periods in 2020 due to increased travel, discretionary compensation expense and public listing costs not incurred during the same periods in 2020. Depreciation and amortization for the three and six months ended ~~March 31,~~June 30, 2021 increased ~~71.6%~~32.1% and 50.0%, respectively, compared to the same three and six month ~~period~~periods in 2020. The increase in depreciation and amortization is predominately from shifting certain assets and personnel from SureHarvest to WFCF in 2020 to better support the entire Company.

Software ~~Sales~~ and Related Consulting Segment

Software ~~license, maintenance~~ and ~~support services~~related consulting revenue is a revenue stream specific to our acquisitions of SureHarvest 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, such as professional appearances, customer education and training, that support our verification business and generate incremental revenue specific to the food and agricultural industry. For the three and six months ended ~~March 31,~~June 30, 2021, software ~~license, maintenance~~ and ~~support services~~related consulting revenue was relatively flat compared to 2020 (including eliminations).

Software-related consulting service revenue primarily represents fees earned from professional appearances, customer education and training related services. Software-related consulting service revenue for the three months ended March 31, 2021 increased approximately 26.8% compared to the same period in 2020 (including eliminations). 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 and six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020 was approximately ~~$0.3 million.~~$0.4 and $0.7 million, respectively. Gross margin for the three and six months ended ~~March 31,~~June 30, 2021 ~~increased~~decreased to ~~27.6%~~27.0% and 27.3%, respectively, compared to ~~23.7%~~41.6% and 49.7% (including eliminations) for the same period in 2020. The three and six month ~~increase~~decrease in gross margin is due primarily to ~~the increase in billable hours~~increased cost of ~~staff focused on software~~labor to support our enhancements ~~and upgrades.~~to our customer’s technology.

Other operating expenses for the three and six months ended ~~March 31,~~June 30, 2021 decreased approximately ~~52.3%~~28.9% and 47.0%, respectively, compared to the same period in 2020 (including eliminations). Depreciation and amortization for the three and six months ended ~~March 31,~~June 30, 2021 decreased ~~65.1%~~61.4% and 63.7%, respectively, compared to the same three and six month ~~period~~periods in 2020. The decrease is predominately due to the decrease in depreciation, amortization and personnel costs from shifting certain assets and personnel from SureHarvest to WFCF in 2020 to better support the entire Company.

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. With our more recent acquisition in the software and related consulting segment, we now believe it is far more beneficial to the long term growth of the company to maintain our own proprietary software. We ~~have learned~~are less focused on licensing the software to others and are able to use our knowledge and expertise, based on the data we own, to make us more competitive in the verification market. Accordingly, we believe that ~~it can take two~~our software and related consulting segment should viewed as an ancillary activity to ~~three years after an acquisition to fully understand the complexities, at which time, we have seen solid improvements in revenues and/or costs.~~our overall business.

Dividend Income from Progressive Beef

For the three and six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~ 2020, the Company received dividend income of $30,000 and $60,000, respectively, 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 and six months ended ~~March 31,~~June 30, 2021, we recorded income tax expense of approximately ~~$11,000~~$104,000 and $115,000, respectively, compared to income tax ~~benefit~~expense of ~~$80,000~~$145,000 and $65,000, respectively, for the same ~~period~~periods in 2020. The effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2021 is favorably impacted by the non-taxability of the PPP loan forgiveness income.

Net Income and Per Share Information

As a result of the foregoing, net income attributable to WFCF shareholders for the three and six months ended ~~March 31,~~June 30, 2021 was approximately ~~$1.2~~$0.2 million and ~~$0.19~~$1.4 million, respectively, and $0.03 and $0.22, respectively, per basic and diluted common share, respectively, compared to net ~~loss~~income of approximately ~~$0.2~~$0.4 million and ~~($0.04)~~$0.1 million, respectively, or $0.06 and $0.02 per basic and diluted common share for the same ~~period~~periods in 2020.

2125

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.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

Our business is subject to a number of risks, including those identified in Item 1A. — “Risk Factors” of our 2020 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,~~June 30, 2021, 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,~~June 30, 2021 is as follows:

Number of Shares (in thousands) Cost of Shares (in thousands) Average Cost per Share

Shares purchased - January 2021 10 $ 144 $ 14.40
Shares purchased - February 2021 9 130 $ 14.44
Shares purchased - March 2021 10 137 $ 13.70
Total 29 $ 411 $ 14.17

	Number of Shares (in thousands)		Cost of Shares (in thousands)		Average Cost per Share

Shares purchased - April 2021		6	$	87	$	14.56
Shares purchased - May 2021		3		48	$	14.27
Shares purchased - June 2021		4		60	$	15.00
Total		13	$	195	$	15.00

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

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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 6,~~August 5, 2021	Where Food Comes From, Inc.

	By:	/s/ John K. Saunders
		Chief Executive Officer

	By:
	By:	/s/ Dannette Henning
		Chief Financial Officer

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	Number of Shares (in thousands)		Cost of Shares (in thousands)		Average Cost per Share

Shares purchased - January 2021		10	$	144	$	14.40
Shares purchased - February 2021		9		130	$	14.44
Shares purchased - March 2021		10		137	$	13.70
Total		29	$	411	$	14.17