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 ~~June~~September 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. 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 6th Street, Suite 400

Castle Rock, CO 80104

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code:

(~~(303)~~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 ☒ 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer” and “accelerated filer” and “smaller reporting entity” in Rule 12b-2 of the Exchange Act.

Large accelerated filer:	☐	Accelerated filer:	☐
Non-accelerated filer:	☐	Smaller reporting company:	☒
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 ☒

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 ~~July 30,~~October 29, 2021, was ~~6,115,394~~6,109,844.

Where Food Comes From, Inc.

Table of Contents

~~June~~September 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	20

Item 4.	Controls and Procedures	26

Part II - Other Information

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 6.	Exhibits	27

Where Food Comes From, Inc.

Consolidated Balance Sheets

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

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

Commitments and contingencies

Equity:
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 11,710 11,612
Treasury stock of 380 (2021) and 338 (2020) shares (3,308 ) (2,702 )
Retained earnings 4,900 3,548
Total equity 13,308 12,464
Total liabilities and stockholders’ equity $ 20,262 $ 19,448
~~The accompanying notes are an integral part of these consolidated financial statements.~~
3
~~Where Food Comes From, Inc.~~
~~Consolidated Statements of Operations~~
~~(Unaudited)~~

Three months ended June 30,
(Amounts in thousands, except per share amounts) 2021 2020
Revenues:
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
Costs of revenues:
Costs of verification and certification services 2,132 1,516
Costs of products 648 501
Costs of software and related consulting 352 299
Total costs of revenues 3,132 2,316
Gross profit 2,009 2,100
Selling, general and administrative expenses 1,727 1,631
Income from operations 282 469
Other income/(expense):
Dividend income from Progressive Beef 30 30
Other income, net - 2
Loan forgiveness from Paycheck Protection Program - -
Gain on sale of assets - -
Loss on foreign currency exchange (5 ) (2 )
Interest expense (1 ) (3 )
Income before income taxes 306 496
Income tax expense 104 145
Net income $ 202 $ 351

Per share - net income:
Basic $ 0.03 $ 0.06
Diluted $ 0.03 $ 0.06

Weighted average number of common shares outstanding:
Basic 6,100 6,219
Diluted 6,186 6,258
September 30, December 31,
(Amounts in thousands, except per share amounts) 2021 2020
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 5,642 $ 4,374
Accounts receivable, net of allowance 2,328 2,508
Inventory 870 -
Prepaid expenses and other current assets 284 592
Total current assets 9,124 7,474
Property and equipment, net 1,484 1,616
Operating lease right-of-use assets, net 2,844 3,030
Investment in Progressive Beef 991 991
Intangible and other assets, net 2,675 2,948
Goodwill 2,946 2,946
Deferred tax assets, net 451 443
Total assets $ 20,515 $ 19,448

Liabilities and Equity
Current liabilities:
Accounts payable $ 896 $ 649
Accrued expenses and other current liabilities 1,346 599
Deferred revenue 1,564 1,132
Current portion of long term debt - 463
Current portion of finance lease obligations 12 13
Current portion of operating lease obligations 302 268
Total current liabilities 4,120 3,124
Long term debt, net of current portion - 572
Finance lease obligations, net of current portion 22 31
Operating lease obligation, net of current portion 3,050 3,257
Total liabilities 7,192 6,984

Commitments and contingencies - -

Equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; NaN issued or outstanding - -
Common stock, $0.001 par value; 95,000 shares authorized; 6,485 (2021) and 6,456 (2020) shares issued, and 6,097 (2021) and 6,118 (2020) shares outstanding 6 6
Additional paid-in-capital 11,879 11,612
Treasury stock of 389 (2021) and 338 (2020) shares (3,415 ) (2,702 )
Retained earnings 4,853 3,548
Total equity 13,323 12,464
Total liabilities and stockholders’ equity $ 20,515 $ 19,448

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

4 3

Where Food Comes From, Inc.
Consolidated Statements of Operations
(Unaudited)

Six months ended June 30, Three months ended September 30,
(Amounts in thousands, except per share amounts) 2021 2020 2021 2020
Revenues:
Verification and certification service revenue $ 6,958 $ 5,911 $ 4,701 $ 4,307
Product sales 1,688 1,521 1,383 1,362
Software and related consulting revenue 935 896 461 528
Total revenues 9,581 8,328 6,545 6,197
Costs of revenues:
Costs of verification and certification services 3,925 3,050 2,438 2,233
Costs of products 1,105 1,003 864 866
Costs of software and related consulting 680 565 315 336
Total costs of revenues 5,710 4,618 3,617 3,435
Gross profit 3,871 3,710 2,928 2,762
Selling, general and administrative expenses 3,500 3,595 1,790 1,806
Income from operations 371 115 1,138 956
Other income/(expense):
Dividend income from Progressive Beef 60 60 30 30
Gain on sale of assets - 19
Other income, net 1 4 - 2
Loan forgiveness from Paycheck Protection Program 1,037 -
(Loss)/gain on foreign currency exchange (7 ) 1
Gain on sale of assets 9 -
Loss on foreign currency exchange (2 ) (2 )
Interest expense (4 ) (5 ) (1 ) (4 )
Income before income taxes 1,467 175 1,165 1,001
Income tax expense 115 65 298 271
Net income $ 1,352 $ 110 $ 867 $ 730

Per share - net income:
Basic $ 0.22 $ 0.02 $ 0.14 $ 0.12
Diluted $ 0.22 $ 0.02 $ 0.14 $ 0.12

Weighted average number of common shares outstanding:
Basic 6,151 6,228 6,094 6,187
Diluted 6,241 6,271 6,157 6,224

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

5 4

Where Food Comes From, Inc.
Consolidated Statements of Operations
(Unaudited)

Nine months ended September 30,
(Amounts in thousands, except per share amounts) 2021 2020
Revenues:
Verification and certification service revenue $ 11,659 $ 10,218
Product sales 3,071 2,883
Software and related consulting revenue 1,396 1,424
Total revenues 16,126 14,525
Costs of revenues:
Costs of verification and certification services 6,363 5,283
Costs of products 1,969 1,869
Costs of software and related consulting 995 901
Total costs of revenues 9,327 8,053
Gross profit 6,799 6,472
Selling, general and administrative expenses 5,290 5,401
Income from operations 1,509 1,071
Other income/(expense):
Dividend income from Progressive Beef 90 90
Other income, net 1 6
Loan forgiveness from Paycheck Protection Program 1,037 -
(Loss)/gain on foreign currency exchange (9 ) (1 )
Gain on sale of assets 9 19
Interest expense (5 ) (9 )
Income before income taxes 2,632 1,176
Income tax expense 413 336
Net income $ 2,219 $ 840

Per share - net income:
Basic $ 0.36 $ 0.14
Diluted $ 0.36 $ 0.13

Weighted average number of common shares outstanding:
Basic 6,146 6,215
Diluted 6,207 6,254
The accompanying notes are an integral part of these consolidated financial statements.
5

Where Food Comes From, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

1
Six months ended June 30, Nine months ended September 30,
(Amounts in thousands) 2021 2020 2021 2020

Operating activities:
Net income $ 1,352 $ 110 $ 2,219 $ 840
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 401 478 601 736
Gain on sale of assets (9 ) - (9 ) (19 )
Stock-based compensation expense 54 55 222 80
Deferred tax expense 3 29 (8 ) 28
Bad debt expense 40 - 45 49
Forgiveness of note payable from Paycheck Protection Program (1,037 ) - (1,037 ) -
Changes in operating assets and liabilities, net of effect from acquisitions:
Accounts receivable 477 745 135 (57 )
Short-term investments - (3 ) - (4 )
Inventory (885 ) - (870 ) -
Prepaid expenses and other assets 106 99 308 (267 )
Accounts payable 73 (243 ) 247 (70 )
Accrued expenses and other current liabilities 519 66 747 505
Deferred revenue 521 409 429 351
Right of use assets and liabilities, net 5 3 4 4
Net cash provided by operating activities 1,620 1,748 3,033 2,176

Investing activities:
Acquisition of Postelsia Holdings, Ltd. - (300 ) - (300 )
Proceeds from sale of assets - 34
Purchases of property, equipment and software development costs (128 ) (329 ) (176 ) (416 )
Net cash used in investing activities (128 ) (629 ) (176 ) (682 )

Financing activities:
Proceeds from long term debt - 1,030 - 1,030
Repayments of finance lease obligations (7 ) (4 ) (7 ) (6 )
Proceeds from stock option exercise 44 3 45 3
Dividends paid to shareholders (914 ) -
Stock repurchase under Stock Buyback Plan (606 ) (269 ) (713 ) (534 )
Net cash (used in) / provided by financing activities (569 ) 760 (1,589 ) 493
Net change in cash 923 1,879 1,268 1,987
Cash at beginning of period 4,374 2,638 4,374 2,638
Cash at end of period $ 5,297 $ 4,517 $ 5,642 $ 4,625

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

6

Where Food Comes From, Inc.
Consolidated Statement of Equity
(Unaudited)

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

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

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

Stock-based compensation expense 10 - 168 - - 168
Stock options exercised - - 1 - - 1
Repurchase of common shares under Stock Buyback Plan (8 ) - - (107 ) - (107 )
Dividends paid - - - - (914 ) (914 )
Net income - - - - 867 867
Balance at September 30, 2021 6,097 $ 6 $ 11,879 $ (3,415 ) $ 4,853 $ 13,323

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

7

Where Food Comes From, Inc.
Consolidated Statement of Equity
(Unaudited)

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

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

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

Stock-based compensation expense - - 25 - - 25
Repurchase of common shares under Stock Buyback Plan (41 ) - - (265 ) - (265 )
Net income attributable to Where Food Comes From, Inc. - - - - 730 730
Net income (loss)
- - - - 730 730
Balance at September 30, 2020 6,170 $ 6 $ 11,528 $ (2,199 ) $ 3,003 $ 12,338

(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.

8

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 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~~nine months ended ~~June~~September 30, 2021 are not necessarily indicative of the results to be expected for any other interim period of any future year.

9

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

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

Antidilutive securities: 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.
10
~~Where Food Comes From, Inc.~~
~~Notes to the Consolidated Financial Statements~~
~~(Unaudited)~~
(in thousands) 2021 2020 2021 2020
Three months ended
September 30,
Nine months ended
September 30,

(in thousands) 2021 2020 2021 2020
Basic:
Weighted average shares outstanding 6,094 6,187 6,146 6,215

Diluted:
Weighted average shares outstanding 6,094 6,187 6,146 6,215
Weighted average effects of dilutive securities 63 37 61 39
Total 6,157 6,224 6,207 6,254

Antidilutive securities: 17 72 17 72
Note 3 - Investment in Progressive Beef, LLC

For the three months ended ~~June~~September 30, 2021 and 2020, the Company received dividend income from Progressive Beef of $30,000, respectively, representing a distribution of their earnings. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company received dividend income totaling $~~60,000~~90,000, respectively. The income is reflected within the “Other income/(expense)” section of the Company’s Consolidated Statement of Income for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.
10
Where Food Comes From, Inc.
Notes to the Consolidated Financial Statements
(Unaudited)

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
June 30, December 31, Estimated September 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 75 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
5,247 5,257
Intangible and other assets, gross 5,247 5,257
Less accumulated amortization 2,969 2,795 3,062 2,795
2,278 2,462
Intangible and other assets, net 2,185 2,462
Tradenames/trademarks (not subject to amortization) 465 465 465 465
2,743 2,927
Intangible assets 2,650 2,927
Other assets 23 21 25 21
Intangible and other assets: $ 2,766 $ 2,948 $ 2,675 $ 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
June 30, December 31, September 30, December 31,
2021 2020 2021 2020

Income and sales taxes payable $ 32 $ 168 $ 155 $ 168
Payroll related accruals 709 271 925 271
Customer deposits 28 31 101 31
Professional fees and other expenses 349 129 165 129
Accrued expenses and other current liabilities $ 1,118 $ 599 $ 1,346 $ 599
Note 6 – Notes Payable
Long Term Debt
Schedule of Long Term Debt
September 30, December 31,
2021 2020
(In thousands)
Paycheck Protection Program Loan $      - $ 1,035
Less current portion of notes payable and other long-term debt - (463 )
Notes payable and other long-term debt $ - $ 572

11

Where Food Comes From, Inc.
Notes to the Consolidated Financial Statements
(Unaudited)

~~Note 6 –~~ ~~Notes Payable~~
~~Long Term Debt~~
~~Schedule of Long Term Debt~~
June 30, December 31,
2021 2020
(In thousands)
Paycheck Protection Program Loan $ - $ 1,035
Less current portion of notes payable and other long-term debt - (463 )
Notes payable and other long-term debt $ - $ 572
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allocated $350billion 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. The LOC provides for $75,080 in working capital. The interest rate is at the Wall Street Journal prime rate plus ~~1.50%~~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 ~~June~~September 30, 2021 and December 31, 2020, the effective interest rate for both periods was ~~4.75%~~4.75%. The LOC is collateralized by all the business assets of ICS. As of ~~June~~September 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 June 30, Six months ended June 30, Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020 2021 2020 2021 2020
Stock options $ 29 $ 23 $ 53 $ 53 $ 42 $ 24 $ 96 $ 77
Restricted stock awards - 1 1 2
Stock awards 126 1 126 3
Total $ 29 $ 24 $ 54 $ 55 $ 168 $ 25 $ 222 $ 80

During the three months ended ~~June~~September 30, 2021, 0 stock options were awarded. During the nine months ended September 30, 2021, the Company awarded stock options to purchase 17,000 shares of the Company’s common stock at an exercise price of $14.77 to employees of the Company.
During the three months ended September 30, 2021, the Company awarded 10,000 shares of the Company’s common stock at a fair market value price of $12.62per share to ~~employees~~an employee of the Company. NaN ~~other stock options~~additional shares were awarded during the ~~six~~nine months ended ~~June~~September 30, 2021.
~~NaN~~ ~~stock options were awarded during~~
During the three months ended ~~June 30, 2020. During the six months ended June~~September 30, 2020, the Company awarded stock options to purchase ~~5,000~~2,000 shares of the Company’s common stock at an exercise price of $~~7.24~~7.20 per share to the members of the Company’s Board of Directors. During the nine months ended September 30, 2020, the Company awarded stock options to purchase 7,000 shares of the Company’s common stock at an exercise price of $7.20 to $8.20 per share to employees of the Company (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse splitthat occurred in December 2020).

12

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
Nine months ended September 30,
2021 2020
Number of options awarded to purchase common shares 17,000 7,000
Risk-free interest rate 0.82 % 1.19 %
Expected volatility 70.06 % 94.7 %
Assumed dividend yield N/A N/A
Expected life of options from the date of grant 9.8 years 9.8 years

Six months ended June 30,
2021 2020
Number of options awarded to purchase common shares 17,000 5,000
Risk-free interest rate 0.82 % 1.56 %
Expected volatility 70.10 % 97.3 %
Assumed dividend yield N/A N/A
Assumed dividend yield - -
Expected life of options from the date of grant 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 Total unrecognized compensation expense
2021 (remaining six months) $ 79 $ - $ 79
2021 (remaining three months) $       37
2022 98 - 98 98
2023 40 - 40 40
2024 11 - 11 11
$ 228 $ - $ 228 $ 186

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.

13

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 17,000 $ 14.77 $ 10.90 10.00
Exercised (17,763 ) $ 2.30 $ 2.92 1.74 (18,045 ) $ 2.54 $ 13.39 1.40
Expired/Forfeited (1,988 ) $ 7.17 $ 6.82 7.28 (2,556 ) $ 7.18 $ 6.88 6.98
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
Outstanding, September 30, 2021 101,485 $ 8.31 $ 7.49 6.07 $ 547,544
Exercisable, September 30, 2021 73,513 $ 6.95 $ 6.81 4.95 $ 481,516
Unvested, September 30, 2021 27,972 $ 11.91 $ 9.29 9.00 $ 66,028

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on ~~June~~September 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 ~~June~~September 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, June 30, 2021 - $ -
Non-vested restricted shares, September 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~~nine months ended ~~June~~September 30, 2021 we recorded an income tax expense of approximately $~~104,000~~298,000 and $~~115,000~~413,000, respectively, compared to income tax expense of $~~145,000~~271,000 and $~~65,000~~336,000 for the same 2020 periods. The effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2021 is favorably impacted by the non-taxability of the PPP loan forgiveness income.

14

Where Food Comes From, Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
Note 9 - Revenue Recognition

Disaggregation of Revenue

We have identified three material revenue categories in our business: (i) verification and certification service revenue, (ii) product sales, (iii) software and related consulting revenue.

Revenue attributable to each of our identified revenue categories is disaggregated in the table below (amounts in thousands).
Schedule of Revenues Disaggregated by Revenue
Three months ended June 30, 2021 Three months ended June 30, 2020 Three months ended September 30, 2021 Three months ended September 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 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 $ 4,701 $ - $ - $ 4,701 $ 4,307 $ - $ - $ 4,307
Product sales 964 - - 964 796 - - 796 1,383 - - 1,383 1,362 - - 1,362
Software and related consulting revenue - 482 - 482 - 512 - 512 - 461 - 461 - 528 - 528
Total revenues $ 4,659 $ 482 $ - $ 5,141 $ 3,904 $ 512 $ - $ 4,416 $ 6,084 $ 461 $ - $ 6,545 $ 5,669 $ 528 $ - $ 6,197

Six months ended June 30, 2021 Six months ended June 30, 2020 Nine months ended September 30, 2021 Nine months ended September 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 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 $ 11,659 $ - $ - $ 11,659 $ 10,218 $ - $ - $ 10,218
Product sales 1,688 - - 1,688 1,521 - - 1,521 3,071 - - 3,071 2,883 - - 2,883
Software and related consulting revenue - 935 - 935 - 1,010 (114 ) 896 - 1,396 - 1,396 - 1,538 (114 ) 1,424
Total revenues $ 8,646 $ 935 $ - $ 9,581 $ 7,432 $ 1,010 $ (114 ) $ 8,328 $ 14,730 $ 1,396 $ - $ 16,126 $ 13,101 $ 1,538 $ (114 ) $ 14,525

Contract Balances

As of ~~June~~September 30, 2021, and December 31, 2020, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $~~2.0~~2.3 and $2.5 million, respectively.

As of ~~June~~September 30, 2021, and December 31, 2020, deferred revenue from contracts with customers was approximately $~~1.7~~1.6 and $1.1 million, respectively. The balance of the contract liabilities at ~~June~~September 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 ~~six~~nine month period ended ~~June~~September 30, 2021~~(amounts in thousands):~~
Schedule of Changes in Contract Liabilities
(amounts in thousands):

Deferred revenue:
Unearned revenue January 1, 2021 $ 1,132 $ 1,132
Unearned billings 2,581 3,320
Revenue recognized (2,060 ) (2,888 )
Unearned revenue June 30, 2021 $ 1,653
Unearned revenue September 30, 2021 $ 1,564
15

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
2021 2020 2021 2020
Three months ended Six months ended Three months ended September 30, Nine months ended September 30,
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 2021 2020 2021 2020
Operating lease cost $ 116 $ 116 $ 233 $ 232 $ 121 $ 116 $ 353 $ 348
Finance lease cost
Amortization of assets 3 2 5 4 2 2 7 6
Interest on finance lease obligations 1 2 2 3 1 1 3 4
Total net lease cost $ 120 $ 120 $ 240 $ 239 $ 124 $ 119 $ 363 $ 358

Included in the table above, for the three and ~~six~~nine months ended ~~June~~September 30, 2021, is $0.1 and $~~0.2~~0.3 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%~~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
Related Party Other Total Related Party Other Total
Operating leases:
Operating lease ROU assets $ 2,662 $ 226 $ 2,888 $ 2,755 $ 238 $ 2,993

Current operating lease liabilities $ 190 $ 107 $ 297 $ 179 $ 89 $ 268
Noncurrent operating lease liabilities 2,983 144 3,127 3,079 178 3,257
Total operating lease liabilities $ 3,173 $ 251 $ 3,424 $ 3,258 $ 267 $ 3,525
September 30, 2021 December 31, 2020
Related Party Other Total Related Party Other Total
Operating leases:
Operating lease ROU assets $ 2,615 $ 201 $ 2,816 $ 2,755 $ 238 $ 2,993

Current operating lease liabilities $ 195 $ 107 $ 302 $ 179 $ 89 $ 268
Noncurrent operating lease liabilities 2,932 118 3,050 3,079 178 3,257
Total operating lease liabilities $ 3,127 $ 225 $ 3,352 $ 3,258 $ 267 $ 3,525

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 %
September 30, 2021 December 31, 2020
Finance leases:
Property and equipment, at cost $ 51 $ 67
Accumulated amortization (23 ) (30 )
Property and equipment, net $ 28 $ 37

Current obligations of finance leases $ 12 $ 13
Finance leases, net of current obligations 22 31
Total finance lease liabilities $ 34 $ 44

Weighted average remaining lease term (in years):
Operating leases 9.4 10.0
Finance leases 3.3 3.7

Weighted average discount rate:
Operating leases 5.8 % 5.8 %
Finance leases 11.9 % 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
2021 2020 2021 2020
Three months ended Six months ended Three months ended September 30, Nine months ended September 30,
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 2021 2020 2021 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 116 $ 111 $ 230 $ 222 $ 120 $ 113 $ 350 $ 335
Operating cash flows from finance leases $ 1 $ 2 $ 2 $ 3 $ 1 $ 1 $ 3 $ 4
Financing cash flows from finance leases $ 2 $ 2 $ 5 $ 4 $ 2 $ 2 $ 7 $ 6

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

16

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 (six remaining months) $          241 $             7
2021 (three remaining months) $ 121 $ 4
2022 482 15 481 15
2023 468 10 468 10
2024 407 5 407 5
2025 405 5 405 5
Thereafter 2,496 - 2,496 -
Total lease payments 4,499 42 4,378 39
Less amount representing interest (1,075 ) (5 ) (1,026 ) (5 )
Total lease obligations 3,424 37 3,352 34
Less current portion (297 ) (11 ) (302 ) (12 )
Long-term lease obligations $ 3,127 $ 26 $ 3,050 $ 22
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 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 and related consulting reportable segment. SureHarvest, which includes Postelsia, is the sole operating segment under the software and related consulting reportable segment. This segment includes software license, maintenance, support and software-related consulting service revenues.

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

17

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 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 September 30, 2021 Three months ended September 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 $ 2,946 $ - $ - $ 2,946
All other assets, net 17,036 3,311 (2,778 ) 17,569 16,548 5,379 (4,612 ) 17,315
Total assets $ 18,983 $ 4,310 $ (2,778 ) $ 20,515 $ 19,494 $ 5,379 $ (4,612 ) $ 20,261

Revenues:
Verification and certification service revenue $ 4,701 $ - $ - $ 4,701 $ 4,307 $ - $ - $ 4,307
Product sales 1,383 - - 1,383 1,362 - - 1,362
Software and related consulting revenue - 461 - 461 - 528 - 528
Total revenues $ 6,084 $ 461 $ - $ 6,545 $ 5,669 $ 528 $ - $ 6,197
Costs of revenues:
Costs of verification and certification services 2,438 - - 2,438 2,233 - - 2,233
Costs of products 864 - - 864 866 - - 866
Costs of software and related consulting - 315 - 315 - 336 - 336
Total costs of revenues 3,302 315 - 3,617 3,099 336 - 3,435
Gross profit 2,782 146 - 2,928 2,570 192 - 2,762
Depreciation & amortization 149 51 - 200 112 145 - 257
Other operating expenses 1,542 48 - 1,590 1,404 145 - 1,549
Segment operating income/(loss) $ 1,091 $ 47 $ - $ 1,138 $ 1,054 $ (98 ) $ - $ 956
Other items to reconcile segment operating income/(loss) to net income/(loss):
Other income/(expense) 29 (2 ) - 27 47 (2 ) - 45
Income tax expense - - (298 ) (298 ) - (8 ) (263 ) (271 )
Net income/(loss) $ 1,120 $ 45 $ (298 ) $ 867 $ 1,101 $ (108 ) $ (263 ) $ 730

Six months ended June 30, 2021 Six months ended June 30, 2020 Nine months ended September 30, 2021 Nine months ended September 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 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 $ 2,946 $ - $ - $ 2,946
All other assets, net 17,327 3,082 (3,093 ) 17,316 17,463 3,474 (4,604 ) 16,333 17,036 3,311 (2,778 ) 17,569 16,548 5,379 (4,612 ) 17,315
Total assets 19,274 4,081 (3,093 ) 20,262 18,596 5,287 (4,604 ) 19,279 18,983 4,310 (2,778 ) 20,515 19,494 5,379 (4,612 ) 20,261

Revenues:
Verification and certification service revenue $ 6,958 $ - $ - $ 6,958 $ 5,911 $ - $ - $ 5,911 $ 11,659 $ - $ - $ 11,659 $ 10,218 $ - $ - $ 10,218
Product sales 1,688 - - 1,688 1,521 - - 1,521 3,071 - - 3,071 2,883 - - 2,883
Software and related consulting revenue - 935 - 935 - 1,010 (114 ) 896 - 1,396 - 1,396 - 1,538 (114 ) 1,424
Total revenues $ 8,646 $ 935 $ - $ 9,581 $ 7,432 $ 1,010 $ (114 ) $ 8,328 $ 14,730 $ 1,396 $ - $ 16,126 $ 13,101 $ 1,538 $ (114 ) $ 14,525
Costs of revenues:
Costs of verification and certification services 3,925 - - 3,925 3,140 - (90 ) 3,050 6,363 - - 6,363 5,373 - (90 ) 5,283
Costs of products 1,105 - - 1,105 1,003 - - 1,003 1,969 - - 1,969 1,869 - - 1,869
Costs of software and related consulting - 680 - 680 - 565 - 565 - 995 - 995 - 901 - 901
Total costs of revenues 5,030 680 - 5,710 4,143 565 (90 ) 4,618 8,332 995 - 9,327 7,242 901 (90 ) 8,053
Gross profit 3,616 255 - 3,871 3,289 445 (24 ) 3,710 6,398 401 - 6,799 5,859 637 (24 ) 6,472
Depreciation & amortization 300 101 - 401 200 278 - 478 448 153 - 601 313 423 - 736
Other operating expenses 2,920 179 - 3,099 2,803 338 (24 ) 3,117 4,463 226 - 4,689 4,206 483 (24 ) 4,665
Segment operating income/(loss) $ 396 $ (25 ) $ - $ 371 $ 286 $ (171 ) $ - $ 115 $ 1,487 $ 22 $ - $ 1,509 $ 1,340 $ (269 ) $ - $ 1,071
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 )
Other items to reconcile segment operating income/(loss) to net income/(loss):
Other income/(expense) 95 (9 ) 1,037 1,123 107 (2 ) - 105
Income tax expense - (5 ) (408 ) (413 ) - (8 ) (328 ) (336 )
Net income/(loss) $ 462 $ (37 ) $ 927 $ 1,352 $ 345 $ (170 ) $ (65 ) $ 110 $ 1,582 $ 8 $ 629 $ 2,219 $ 1,447 $ (279 ) $ (328 ) $ 840

18

Where Food Comes From, Inc.
Notes to the Consolidated Financial Statements
(Unaudited)
Note 13 – Supplemental Cash Flow Information
Schedule of Supplemental Cash Flow Information

(Amounts in thousands) 2021 2020
Six months ended June 30, Nine months ended September 30,
(Amounts in thousands) 2021 2020 2021 2020
Cash paid during the year:
Interest expense $ 1 $ 5 $ 5 $ 5
Income taxes $ 345 $ 10 $ 595 $ 362

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.

19

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. 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.

20

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. 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

Our business is subject to seasonal fluctuations. Significant portions of our verification and certification service revenue are typically realized during late May through early October when the calf marketings and the growing seasons are at their peak. Because of the seasonality of the business and our industry, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Liquidity and Capital Resources

At ~~June~~September 30, 2021, we had cash, cash equivalents of approximately ~~$5.3~~$5.6 million compared to approximately $4.4 million at December 31, 2020. Our working capital at ~~June~~September 30, 2021 was approximately ~~$4.9~~$5.0 million compared to $4.4 million at December 31, 2020.

Net cash provided by operating activities for the ~~six~~nine months ended ~~June~~September 30, 2021 was approximately ~~$1.6~~$3.0 million compared to ~~$1.7~~$2.2 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 ~~June~~September 30, 2021 and 2020 was primarily driven by a change in ~~accounts receivable, accounts payable, inventory~~accrued expenses and deferred ~~revenue.~~revenue, offset by cash used for inventory.

Net cash used in investing activities for the ~~six~~nine months ended ~~June~~September 30, 2021, was approximately ~~$0.1~~$0.2 million compared to ~~$0.6~~$0.7 million in the 2020 period. Net cash used in the period ending ~~June~~September 30, 2021 was primarily for the purchase of a vehicle and equipment. Net cash used in the ~~June~~September 30, 2020 period was attributable to the acquisition of Postelsia Holdings, Ltd for $0.3 million and investment in software of ~~$0.3~~$0.4 million.

Net cash used in financing activities for the ~~six~~nine months ended ~~June~~September 30, 2021 was approximately ~~$0.6~~$1.6 million compared to net cash provided by financing activities of ~~$0.8~~$0.5 million in the 2020 period. Cash used for the period ending ~~June~~September 30, 2021, was primarily due to the repurchase of common shares under the Stock Buyback ~~Plan.~~Plan and dividends paid to shareholders. Cash provided for the period ending ~~June~~September 30, 2020, was primarily from proceeds from the PPP loan of $1.0 million, offset by ~~$0.3~~$0.5 million for the repurchase of common shares under the Stock Buyback Plan.

21

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 ~~June~~September 30, 2021, and December 31, 2020, the effective interest rate was 4.75%, respectively. The LOC is collateralized by all the business assets of Where Food Comes From Organic, Inc. (“WFCFO”). As of ~~June~~September 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 ~~June~~September 30, 2021, we had no off-balance sheet arrangements of any type.

22

RESULTS OF OPERATIONS

Three and ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same 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 September 30, 2021 Three months ended September 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 $ 2,946 $ - $ - $ 2,946
All other assets, net 17,036 3,311 (2,778 ) 17,569 16,548 5,379 (4,612 ) 17,315
Total assets $ 18,983 $ 4,310 $ (2,778 ) $ 20,515 $ 19,494 $ 5,379 $ (4,612 ) $ 20,261

Revenues:
Verification and certification service revenue $ 4,701 $ - $ - $ 4,701 $ 4,307 $ - $ - $ 4,307
Product sales 1,383 - - 1,383 1,362 - - 1,362
Software and related consulting revenue - 461 - 461 - 528 - 528
Total revenues $ 6,084 $ 461 $ - $ 6,545 $ 5,669 $ 528 $ - $ 6,197
Costs of revenues:
Costs of verification and certification services 2,438 - - 2,438 2,233 - - 2,233
Costs of products 864 - - 864 866 - - 866
Costs of software and related consulting - 315 - 315 - 336 - 336
Total costs of revenues 3,302 315 - 3,617 3,099 336 - 3,435
Gross profit 2,782 146 - 2,928 2,570 192 - 2,762
Depreciation & amortization 149 51 - 200 112 145 - 257
Other operating expenses 1,542 48 - 1,590 1,404 145 - 1,549
Segment operating income/(loss) $ 1,091 $ 47 $ - $ 1,138 $ 1,054 $ (98 ) $ - $ 956
Other items to reconcile segment operating income/(loss) to net income/(loss):
Other income/(expense) 29 (2 ) - 27 47 (2 ) - 45
Income tax expense - - (298 ) (298 ) - (8 ) (263 ) (271 )
Net income/(loss) $ 1,120 $ 45 $ (298 ) $ 867 $ 1,101 $ (108 ) $ (263 ) $ 730

Six months ended June 30, 2021 Six months ended June 30, 2020 Nine months ended September 30, 2021 Nine months ended September 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 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 $ 2,946 $ - $ - $ 2,946
All other assets, net 17,327 3,082 (3,093 ) 17,316 17,463 3,474 (4,604 ) 16,333 17,036 3,311 (2,778 ) 17,569 16,548 5,379 (4,612 ) 17,315
Total assets 19,274 4,081 (3,093 ) 20,262 18,596 5,287 (4,604 ) 19,279 18,983 4,310 (2,778 ) 20,515 19,494 5,379 (4,612 ) 20,261

Revenues:
Verification and certification service revenue $ 6,958 $ - $ - $ 6,958 $ 5,911 $ - $ - $ 5,911 $ 11,659 $ - $ - $ 11,659 $ 10,218 $ - $ - $ 10,218
Product sales 1,688 - - 1,688 1,521 - - 1,521 3,071 - - 3,071 2,883 - - 2,883
Software and related consulting revenue - 935 - 935 - 1,010 (114 ) 896 - 1,396 - 1,396 - 1,538 (114 ) 1,424
Total revenues $ 8,646 $ 935 $ - $ 9,581 $ 7,432 $ 1,010 $ (114 ) $ 8,328 $ 14,730 $ 1,396 $ - $ 16,126 $ 13,101 $ 1,538 $ (114 ) $ 14,525
Costs of revenues:
Costs of verification and certification services 3,925 - - 3,925 3,140 - (90 ) 3,050 6,363 - - 6,363 5,373 - (90 ) 5,283
Costs of products 1,105 - - 1,105 1,003 - - 1,003 1,969 - - 1,969 1,869 - - 1,869
Costs of software and related consulting - 680 - 680 - 565 - 565 - 995 - 995 - 901 - 901
Total costs of revenues 5,030 680 - 5,710 4,143 565 (90 ) 4,618 8,332 995 - 9,327 7,242 901 (90 ) 8,053
Gross profit 3,616 255 - 3,871 3,289 445 (24 ) 3,710 6,398 401 - 6,799 5,859 637 (24 ) 6,472
Depreciation & amortization 300 101 - 401 200 278 - 478 448 153 - 601 313 423 - 736
Other operating expenses 2,920 179 - 3,099 2,803 338 (24 ) 3,117 4,463 226 - 4,689 4,206 483 (24 ) 4,665
Segment operating income/(loss) $ 396 $ (25 ) $ - $ 371 $ 286 $ (171 ) $ - $ 115 $ 1,487 $ 22 $ - $ 1,509 $ 1,340 $ (269 ) $ - $ 1,071
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 )
Other items to reconcile segment operating income/(loss) to net income/(loss):
Other income/(expense) 95 (9 ) 1,037 1,123 107 (2 ) - 105
Income tax expense - (5 ) (408 ) (413 ) - (8 ) (328 ) (336 )
Net income/(loss) $ 462 $ (37 ) $ 927 $ 1,352 $ 345 $ (170 ) $ (65 ) $ 110 $ 1,582 $ 8 $ 629 $ 2,219 $ 1,447 $ (279 ) $ (328 ) $ 840

23

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~~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~~nine months ended ~~June~~September 30, 2021 increased ~~18.9%~~9.2% and ~~17.7%~~14.1%, 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~~nine months ended ~~June~~September 30, 2021 increased ~~21.1%~~1.5% and ~~11.0%~~6.5%, respectively. Overall, our product sales have increased primarily in response to the requirement for source and age verification using an identification tag at birth for cattle.

Costs of revenues for our verification and certification segment for the three and ~~six~~nine months ended ~~June~~September 30, 2021 were approximately ~~$2.8~~$2.4 million and ~~$5.0~~$6.4 million, respectively, compared to approximately ~~$2.0~~$2.2 million and ~~$4.1~~$5.3 million (including eliminations), respectively, for the same periods in 2020. Gross margin for the three ~~and six~~ months ended ~~June~~September 30, 2021 increased to 45.7% compared to 45.3% (including eliminations) for the same period ended September 30, 2020. Gross margin for the nine months ended September 30, 2021 decreased to ~~40.3% and 41.9%, respectively,~~43.4% compared to ~~48.3% and 43.0%~~44.0% (including eliminations)~~, respectively, in 2020~~ for the same period ended September 30, 2020. The changes are primarily due to a change in product mix of our offerings which included new customers, new ~~offerings, returned demand for audits that were delayed in 2020 due to COVID-19 social distancing measures and additional compensation expense incurred to support the increased activity.~~offerings. 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~~nine months ended ~~June~~September 30, 2021 increased by approximately ~~13.9%~~9.8% and ~~5.0%~~6.6%, respectively, compared to the same three and ~~six~~nine month 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~~nine months ended ~~June~~September 30, 2021 increased ~~32.1%~~33.0% and ~~50.0%~~43.1%, respectively, compared to the same three and ~~six~~nine month 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 and Related Consulting Segment

Software and 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 ~~June~~September 30, 2021, software and related consulting revenue was decreased $0.1 million compared to 2020 (including eliminations). For the nine months ended September 30, 2021, software and related consulting revenue was relatively flat compared to 2020 (including eliminations).

Costs of revenues for our software and related consulting segment for the three ~~and six~~ months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020 was approximately ~~$0.4~~$0.3 million. The cost of revenues for the nine months ended September 30, 2021 and ~~$0.7~~September 30, 2020 was $1.0 million and $0.9 million, respectively. Gross margin for the three and ~~six~~nine months ended ~~June~~September 30, 2021 decreased to ~~27.0%~~31.7% and ~~27.3%~~28.7%, respectively, compared to ~~41.6%~~36.4% and ~~49.7%~~44.7% (including eliminations) for the same period in 2020. The three and ~~six~~nine month decrease in gross margin is due primarily to increased cost of labor to support our enhancements to our customer’s technology.

Other operating expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2021 decreased approximately ~~28.9%~~66.9% and ~~47.0%~~53.2%, respectively, compared to the same period in 2020 (including eliminations). Depreciation and amortization for the three and ~~six~~nine months ended ~~June~~September 30, 2021 decreased ~~61.4%~~64.8% and ~~63.7%~~63.8%, respectively, compared to the same three and ~~six~~nine month 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.

24

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 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 our software and related consulting segment should viewed as an ancillary activity to our overall business.

Dividend Income from Progressive Beef

For the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company received dividend income of $30,000 and ~~$60,000,~~$90,000, 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~~nine months ended ~~June~~September 30, 2021, we recorded income tax expense of approximately ~~$104,000~~$298,000 and ~~$115,000,~~$413,000, respectively, compared to income tax expense of ~~$145,000~~$271,000 and ~~$65,000,~~$336,000, respectively, for the same periods in 2020. The effective tax rate for the ~~six~~nine months ended ~~June~~September 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~~nine months ended ~~June~~September 30, 2021 was approximately ~~$0.2~~$0.9 million and ~~$1.4~~$2.2 million, respectively, and ~~$0.03~~$0.14 and ~~$0.22,~~$0.36, respectively, per basic and diluted common share, respectively, compared to net income of approximately ~~$0.4~~$0.7 million and ~~$0.1~~$0.8 million, respectively, or ~~$0.06~~$0.12 per basic and ~~$0.02~~diluted common shares for the three months ended September 30, 2020 and $0.14 and $0.13 per basic and diluted common share for the ~~same periods in~~nine months ended September 30, 2020.
On August 16, 2021, the Company paid a one-time special cash dividend totaling $0.15 per common share to shareholders of record as of July 27, 2021.

25

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

From time to time, we may become involved in various legal actions, administrative proceedings and claims in the ordinary course of business. We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. We are not aware of any significant legal actions at this time.

ITEM 1A. RISK FACTORS

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

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

Shares purchased - July 2021 1 $ 16 $ 15.59
Shares purchased - August 2021 - - $ -
Shares purchased - September 2021     7      91 $ 12.60
Total 8 $ 107 $ 12.96

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

27

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: ~~August 5,~~November 4, 2021 Where Food Comes From, Inc.

By: /s/ John K. Saunders
Chief Executive Officer
By: /s/ Dannette Henning
Chief Financial Officer

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

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

Commitments and contingencies

Equity:
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		11,710			11,612
Treasury stock of 380 (2021) and 338 (2020) shares		(3,308	)		(2,702	)
Retained earnings		4,900			3,548
Total equity		13,308			12,464
Total liabilities and stockholders’ equity	$	20,262		$	19,448


	Three months ended June 30,
(Amounts in thousands, except per share amounts)	2021			2020
Revenues:
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
Costs of revenues:
Costs of verification and certification services		2,132			1,516
Costs of products		648			501
Costs of software and related consulting		352			299
Total costs of revenues		3,132			2,316
Gross profit		2,009			2,100
Selling, general and administrative expenses		1,727			1,631
Income from operations		282			469
Other income/(expense):
Dividend income from Progressive Beef		30			30
Other income, net		-			2
Loan forgiveness from Paycheck Protection Program		-			-
Gain on sale of assets		-			-
Loss on foreign currency exchange		(5	)		(2	)
Interest expense		(1	)		(3	)
Income before income taxes		306			496
Income tax expense		104			145
Net income	$	202		$	351

Per share - net income:
Basic	$	0.03		$	0.06
Diluted	$	0.03		$	0.06

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

	September 30,			December 31,
(Amounts in thousands, except per share amounts)	2021			2020
Assets		(Unaudited)
Current assets:
Cash and cash equivalents	$	5,642		$	4,374
Accounts receivable, net of allowance		2,328			2,508
Inventory		870			-
Prepaid expenses and other current assets		284			592
Total current assets		9,124			7,474
Property and equipment, net		1,484			1,616
Operating lease right-of-use assets, net		2,844			3,030
Investment in Progressive Beef		991			991
Intangible and other assets, net		2,675			2,948
Goodwill		2,946			2,946
Deferred tax assets, net		451			443
Total assets	$	20,515		$	19,448

Liabilities and Equity
Current liabilities:
Accounts payable	$	896		$	649
Accrued expenses and other current liabilities		1,346			599
Deferred revenue		1,564			1,132
Current portion of long term debt		-			463
Current portion of finance lease obligations		12			13
Current portion of operating lease obligations		302			268
Total current liabilities		4,120			3,124
Long term debt, net of current portion		-			572
Finance lease obligations, net of current portion		22			31
Operating lease obligation, net of current portion		3,050			3,257
Total liabilities		7,192			6,984

Commitments and contingencies		-			-

Equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; NaN issued or outstanding		-			-
Common stock, $0.001 par value; 95,000 shares authorized; 6,485 (2021) and 6,456 (2020) shares issued, and 6,097 (2021) and 6,118 (2020) shares outstanding		6			6
Additional paid-in-capital		11,879			11,612
Treasury stock of 389 (2021) and 338 (2020) shares		(3,415	)		(2,702	)
Retained earnings		4,853			3,548
Total equity		13,323			12,464
Total liabilities and stockholders’ equity	$	20,515		$	19,448


	Six months ended June 30,						Three months ended September 30,
(Amounts in thousands, except per share amounts)	2021			2020			2021			2020
Revenues:
Verification and certification service revenue	$	6,958		$	5,911		$	4,701		$	4,307
Product sales		1,688			1,521			1,383			1,362
Software and related consulting revenue		935			896			461			528
Total revenues		9,581			8,328			6,545			6,197
Costs of revenues:
Costs of verification and certification services		3,925			3,050			2,438			2,233
Costs of products		1,105			1,003			864			866
Costs of software and related consulting		680			565			315			336
Total costs of revenues		5,710			4,618			3,617			3,435
Gross profit		3,871			3,710			2,928			2,762
Selling, general and administrative expenses		3,500			3,595			1,790			1,806
Income from operations		371			115			1,138			956
Other income/(expense):
Dividend income from Progressive Beef		60			60			30			30
Gain on sale of assets								-			19
Other income, net		1			4			-			2
Loan forgiveness from Paycheck Protection Program		1,037			-
(Loss)/gain on foreign currency exchange		(7	)		1
Gain on sale of assets		9			-
Loss on foreign currency exchange								(2	)		(2	)
Interest expense		(4	)		(5	)		(1	)		(4	)
Income before income taxes		1,467			175			1,165			1,001
Income tax expense		115			65			298			271
Net income	$	1,352		$	110		$	867		$	730

Per share - net income:
Basic	$	0.22		$	0.02		$	0.14		$	0.12
Diluted	$	0.22		$	0.02		$	0.14		$	0.12

Weighted average number of common shares outstanding:
Basic		6,151			6,228			6,094			6,187
Diluted		6,241			6,271			6,157			6,224


	Nine months ended September 30,
(Amounts in thousands, except per share amounts)	2021			2020
Revenues:
Verification and certification service revenue	$	11,659		$	10,218
Product sales		3,071			2,883
Software and related consulting revenue		1,396			1,424
Total revenues		16,126			14,525
Costs of revenues:
Costs of verification and certification services		6,363			5,283
Costs of products		1,969			1,869
Costs of software and related consulting		995			901
Total costs of revenues		9,327			8,053
Gross profit		6,799			6,472
Selling, general and administrative expenses		5,290			5,401
Income from operations		1,509			1,071
Other income/(expense):
Dividend income from Progressive Beef		90			90
Other income, net		1			6
Loan forgiveness from Paycheck Protection Program		1,037			-
(Loss)/gain on foreign currency exchange		(9	)		(1	)
Gain on sale of assets		9			19
Interest expense		(5	)		(9	)
Income before income taxes		2,632			1,176
Income tax expense		413			336
Net income	$	2,219		$	840

Per share - net income:
Basic	$	0.36		$	0.14
Diluted	$	0.36		$	0.13

Weighted average number of common shares outstanding:
Basic		6,146			6,215
Diluted		6,207			6,254

										1
	Six months ended June 30,						Nine months ended September 30,
(Amounts in thousands)	2021			2020			2021			2020

Operating activities:
Net income	$	1,352		$	110		$	2,219		$	840
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization		401			478			601			736
Gain on sale of assets		(9	)		-			(9	)		(19	)
Stock-based compensation expense		54			55			222			80
Deferred tax expense		3			29			(8	)		28
Bad debt expense		40			-			45			49
Forgiveness of note payable from Paycheck Protection Program		(1,037	)		-			(1,037	)		-
Changes in operating assets and liabilities, net of effect from acquisitions:
Accounts receivable		477			745			135			(57	)
Short-term investments		-			(3	)		-			(4	)
Inventory		(885	)		-			(870	)		-
Prepaid expenses and other assets		106			99			308			(267	)
Accounts payable		73			(243	)		247			(70	)
Accrued expenses and other current liabilities		519			66			747			505
Deferred revenue		521			409			429			351
Right of use assets and liabilities, net		5			3			4			4
Net cash provided by operating activities		1,620			1,748			3,033			2,176

Investing activities:
Acquisition of Postelsia Holdings, Ltd.		-			(300	)		-			(300	)
Proceeds from sale of assets								-			34
Purchases of property, equipment and software development costs		(128	)		(329	)		(176	)		(416	)
Net cash used in investing activities		(128	)		(629	)		(176	)		(682	)

Financing activities:
Proceeds from long term debt		-			1,030			-			1,030
Repayments of finance lease obligations		(7	)		(4	)		(7	)		(6	)
Proceeds from stock option exercise		44			3			45			3
Dividends paid to shareholders								(914	)		-
Stock repurchase under Stock Buyback Plan		(606	)		(269	)		(713	)		(534	)
Net cash (used in) / provided by financing activities		(569	)		760			(1,589	)		493
Net change in cash		923			1,879			1,268			1,987
Cash at beginning of period		4,374			2,638			4,374			2,638
Cash at end of period	$	5,297		$	4,517		$	5,642		$	4,625


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

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

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

Stock-based compensation expense																	10			-		168		-			-			168
Stock options exercised																	-			-		1		-			-			1
Repurchase of common shares under Stock Buyback Plan																	(8	)		-		-		(107	)		-			(107	)
Dividends paid																	-			-		-		-			(914	)		(914	)
Net income																	-			-		-		-			867			867
Balance at September 30, 2021																	6,097		$	6	$	11,879	$	(3,415	)	$	4,853		$	13,323


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

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

Antidilutive securities:		17		70		17		66

	June 30,		December 31,		Estimated		September 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		75		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
		5,247		5,257
Intangible and other assets, gross								5,247		5,257
Less accumulated amortization		2,969		2,795				3,062		2,795
		2,278		2,462
Intangible and other assets, net								2,185		2,462
Tradenames/trademarks (not subject to amortization)		465		465				465		465
		2,743		2,927
Intangible assets								2,650		2,927
Other assets		23		21				25		21
Intangible and other assets:	$	2,766	$	2,948			$	2,675	$	2,948

Years ended December 31st:	Unvested stock options		Unvested restricted stock awards		Total unrecognized compensation expense		Total unrecognized compensation expense
2021 (remaining six months)	$	79	$	-	$	79
2021 (remaining three months)							$	37
2022		98		-		98		98
2023		40		-		40		40
2024		11		-		11		11
	$	228	$	-	$	228	$	186

								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				17,000		$	14.77	$	10.90		10.00
Exercised		(17,763	)	$	2.30	$	2.92		1.74				(18,045	)	$	2.54	$	13.39		1.40
Expired/Forfeited		(1,988	)	$	7.17	$	6.82		7.28				(2,556	)	$	7.18	$	6.88		6.98
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
Outstanding, September 30, 2021													101,485		$	8.31	$	7.49		6.07	$	547,544
Exercisable, September 30, 2021													73,513		$	6.95	$	6.81		4.95	$	481,516
Unvested, September 30, 2021													27,972		$	11.91	$	9.29		9.00	$	66,028

	Three months ended June 30, 2021								Three months ended June 30, 2020								Three months ended September 30, 2021								Three months ended September 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 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	$	4,701	$	-	$	-	$	4,701	$	4,307	$	-	$	-	$	4,307
Product sales		964		-		-		964		796		-		-		796		1,383		-		-		1,383		1,362		-		-		1,362
Software and related consulting revenue		-		482		-		482		-		512		-		512		-		461		-		461		-		528		-		528
Total revenues	$	4,659	$	482	$	-	$	5,141	$	3,904	$	512	$	-	$	4,416	$	6,084	$	461	$	-	$	6,545	$	5,669	$	528	$	-	$	6,197

	Six months ended June 30, 2021								Six months ended June 30, 2020									Nine months ended September 30, 2021								Nine months ended September 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 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	$	11,659	$	-	$	-	$	11,659	$	10,218	$	-	$	-		$	10,218
Product sales		1,688		-		-		1,688		1,521		-		-			1,521		3,071		-		-		3,071		2,883		-		-			2,883
Software and related consulting revenue		-		935		-		935		-		1,010		(114	)		896		-		1,396		-		1,396		-		1,538		(114	)		1,424
Total revenues	$	8,646	$	935	$	-	$	9,581	$	7,432	$	1,010	$	(114	)	$	8,328	$	14,730	$	1,396	$	-	$	16,126	$	13,101	$	1,538	$	(114	)	$	14,525

(amounts in thousands):

Deferred revenue:
Unearned revenue January 1, 2021	$	1,132		$	1,132
Unearned billings		2,581			3,320
Revenue recognized		(2,060	)		(2,888	)
Unearned revenue June 30, 2021	$	1,653
Unearned revenue September 30, 2021				$	1,564

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

Current operating lease liabilities	$	190	$	107	$	297	$	179	$	89	$	268
Noncurrent operating lease liabilities		2,983		144		3,127		3,079		178		3,257
Total operating lease liabilities	$	3,173	$	251	$	3,424	$	3,258	$	267	$	3,525

	September 30, 2021						December 31, 2020
	Related Party		Other		Total		Related Party		Other		Total
Operating leases:
Operating lease ROU assets	$	2,615	$	201	$	2,816	$	2,755	$	238	$	2,993

Current operating lease liabilities	$	195	$	107	$	302	$	179	$	89	$	268
Noncurrent operating lease liabilities		2,932		118		3,050		3,079		178		3,257
Total operating lease liabilities	$	3,127	$	225	$	3,352	$	3,258	$	267	$	3,525

	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	%

Years Ending December 31st,	Operating Leases			Finance Leases			Operating Leases			Finance Leases
2021 (six remaining months)	$	241		$	7
2021 (three remaining months)							$	121		$	4
2022		482			15			481			15
2023		468			10			468			10
2024		407			5			407			5
2025		405			5			405			5
Thereafter		2,496			-			2,496			-
Total lease payments		4,499			42			4,378			39
Less amount representing interest		(1,075	)		(5	)		(1,026	)		(5	)
Total lease obligations		3,424			37			3,352			34
Less current portion		(297	)		(11	)		(302	)		(12	)
Long-term lease obligations	$	3,127		$	26		$	3,050		$	22

	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

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

Shares purchased - July 2021		1	$	16	$	15.59
Shares purchased - August 2021		-		-	$	-
Shares purchased - September 2021		7		91	$	12.60
Total		8	$	107	$	12.96

	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

Date: ~~August 5,~~November 4, 2021	Where Food Comes From, Inc.

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