UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the Quarterly period ended ~~September 30, 2021~~March 31, 2022

☐	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

of incorporation or organization)

(I.R.S. Employer

Identification No.)

202 ~~6th~~6^th 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 ~~October~~April 29, ~~2021,~~2022, was ~~6,109,844~~6,023,841.

Where Food Comes From, Inc.

Table of Contents

~~September 30, 2021~~March 31, 2022

Part 1 - Financial Information

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2016

Item 4.	Controls and Procedures	2621

Part II - Other Information

Item 1.	Legal Proceedings	2722

Item 1A.	Risk Factors	2722

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2722

Item 6.	Exhibits	2722

Where Food Comes From, Inc.

Consolidated Balance Sheets

	March 31,			December 31,
(Amounts in thousands, except per share amounts)	2022			2021
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,093		$	5,414
Accounts receivable, net of allowance		2,200			2,178
Inventory		815			767
Prepaid expenses and other current assets		381			325
Total current assets		9,489			8,684
Property and equipment, net		1,210			1,295
Right-of-use assets, net		2,744			2,823
Investment in Progressive Beef		991			991
Intangible and other assets, net		2,491			2,581
Goodwill, net		2,946			2,946
Deferred tax assets, net		483			464
Total assets	$	20,354		$	19,784

Liabilities and Equity
Current liabilities:
Accounts payable	$	594		$	447
Accrued expenses and other current liabilities		1,324			710
Deferred revenue		1,277			1,513
Current portion of finance lease obligations		12			13
Current portion of operating lease obligations		314			313
Total current liabilities		3,521			2,996
Finance lease obligations, net of current portion		17			19
Operating lease obligation, net of current portion		2,941			3,020
Total liabilities		6,479			6,035
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; 6,491 (2022) and 6,489 (2021) shares issued, and 6,039 (2022) and 6,071 (2021) shares outstanding		6			6
Additional paid-in-capital		12,006			11,955
Treasury stock of 452 (2022) and 419 (2021) shares		(4,229	)		(3,807	)
Retained earnings		6,092			5,595
Total equity		13,875			13,749
Total liabilities and stockholders’ equity	$	20,354		$	19,784

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.

Where Food Comes From, Inc.

Consolidated Statements of Operations

(Unaudited)

Three months ended September 30,
(Amounts in thousands, except per share amounts) 2021 2020
Revenues:
Verification and certification service revenue $ 4,701 $ 4,307
Product sales 1,383 1,362
Software and related consulting revenue 461 528
Total revenues 6,545 6,197
Costs of revenues:
Costs of verification and certification services 2,438 2,233
Costs of products 864 866
Costs of software and related consulting 315 336
Total costs of revenues 3,617 3,435
Gross profit 2,928 2,762
Selling, general and administrative expenses 1,790 1,806
Income from operations 1,138 956
Other income/(expense):
Dividend income from Progressive Beef 30 30
Gain on sale of assets - 19
Other income, net - 2
Loan forgiveness from Paycheck Protection Program
Loss on foreign currency exchange (2 ) (2 )
Interest expense (1 ) (4 )
Income before income taxes 1,165 1,001
Income tax expense 298 271
Net income $ 867 $ 730

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

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


	Three months ended March 31,
(Amounts in thousands, except per share amounts)	2022			2021
Revenues:
Verification and certification service revenue	$	3,784		$	3,263
Product sales		1,007			724
Software and related consulting revenue		1,365			453
Total revenues		6,156			4,440
Costs of revenues:
Costs of verification and certification services		2,036			1,793
Costs of products		537			457
Costs of software and related consulting		1,186			328
Total costs of revenues		3,759			2,578
Gross profit		2,397			1,862
Selling, general and administrative expenses		1,774			1,773
Income from operations		623			89
Other income/(expense):
Dividend income from Progressive Beef		50			30
Other income, net		-			1
Loan forgiveness from Paycheck Protection Program		-			1,037
Gain on sale of assets		-			9
Loss on foreign currency exchange		(12	)		(2	)
Interest expense		(1	)		(3	)
Income before income taxes		660			1,161
Income tax expense		163			11
Net income	$	497		$	1,150

Per share - net income:
Basic	$	0.08		$	0.19
Diluted	$	0.08		$	0.19

Weighted average number of common shares outstanding:
Basic		6,067			6,136
Diluted		6,150			6,231

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

~~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.~~

Where Food Comes From, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

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

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

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

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


	Three months ended March 31,
(Amounts in thousands)	2022			2021

Operating activities:
Net income	$	497		$	1,150
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		195			202
Gain on sale of assets		-			(9	)
Stock-based compensation expense		51			25
Deferred tax (benefit) / expense		(19	)		34
Bad debt expense		5			28
Forgiveness of note payable from Paycheck Protection Program		-			(1,037	)
Changes in operating assets and liabilities:
Accounts receivable		(27	)		614
Inventory		(48	)		(350	)
Prepaid expenses and other assets		(56	)		(31	)
Accounts payable		147			26
Accrued expenses and other current liabilities		613			309
Deferred revenue		(236	)		203
Right of use assets and liabilities, net		(2	)		2
Net cash provided by operating activities		1,120			1,166

Investing activities:
Purchases of property, equipment and software development costs		(16	)		(170	)
Net cash used in investing activities		(16	)		(170	)

Financing activities:
Repayments of finance lease obligations		(3	)		(3	)
Proceeds from stock option exercise		-			40
Stock repurchase under Stock Buyback Plan		(422	)		(411	)
Net cash used in financing activities		(425	)		(374	)
Net change in cash		679			622
Cash at beginning of period		5,414			4,374
Cash at end of period	$	6,093		$	4,996

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

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

Balance at December 31, 2021																		6,071		$	6	$	11,955	$	(3,807	)	$	5,595	$	13,749
Beginning balance, value																		6,071		$	6	$	11,955	$	(3,807	)	$	5,595	$	13,749
Stock-based compensation expense		-			-		29		-			-			29			2			-		51		-			-		51
Stock options exercised		1			-		4		-			-			4
Repurchase of common shares under Stock Buyback Plan		(13	)		-		-		(195	)		-			(195	)		(34	)		-		-		(422	)		-		(422	)
Net income		-			-		-		-			202			202			-			-		-		-			497		497
Balance at June 30, 2021		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
Balance at March 31, 2022																		6,039		$	6	$	12,006	$	(4,229	)	$	6,092	$	13,875
Ending balance, value																		6,039		$	6	$	12,006	$	(4,229	)	$	6,092	$	13,875

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

~~Where Food Comes From, Inc.~~

~~Consolidated Statement of Equity~~

~~(Unaudited)~~

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

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

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

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.~~

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 and technology solutions that ~~support our verification business and~~ generate incremental revenue specific to the food and agricultural ~~industry.~~industry and drive sustainable value creation. 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,~~2021, included in our Form 10-K filed on February ~~18, 2021.~~28, 2022. 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results to be expected for any other interim period of any future year.

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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

Seasonality

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

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU’s. ASU’s 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

(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


	Three months ended March 31,
	2022		2021
Basic:
Weighted average shares outstanding		6,067		6,136

Diluted:
Weighted average shares outstanding		6,067		6,136
Weighted average effects of dilutive securities		83		95
Total		6,150		6,231

Antidilutive securities:		17		-

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.

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

Note 3 - Investment in Progressive Beef, LLC

For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company received dividend income from Progressive Beef of $50,000 and $30,000, respectively, representing a distribution of their earnings. ~~For the nine months ended September 30, 2021 and 2020, the Company received dividend income totaling $90,000, respectively.~~ The income is reflected within the “Other income/(expense)” section of the Company’s Consolidated Statement of ~~Income~~Operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

~~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

	September 30,		December 31,		Estimated	March 31,		December 31,		Estimated
	2021		2020		Useful Life	2022		2021		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		75		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
Intangible and other assets, gross		5,247		5,257			5,247		5,247
Less accumulated amortization		3,062		2,795			3,246		3,154
Intangible and other assets, net		2,185		2,462			2,001		2,093
Tradenames/trademarks (not subject to amortization)		465		465			465		465
Intangible assets		2,650		2,927			2,466		2,558
Other assets		25		21			25		23
Intangible and other assets:	$	2,675	$	2,948		$	2,491	$	2,581

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

September 30, December 31,
2021 2020

Income and sales taxes payable $ 155 $ 168
Payroll related accruals 925 271
Customer deposits 101 31
Professional fees and other expenses 165 129
Accrued expenses and other current liabilities $ 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

	March 31,		December 31,
	2022		2021

Income and sales taxes payable	$	376	$	185
Payroll related accruals		412		288
Customer deposits		101		76
Professional fees and other expenses		435		161
Accrued expenses and other current liabilities	$	1,324	$	710

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

~~The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act allocated $~~Note 6 – ~~350~~Notes Payable billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (“PPP”), the initiative provides federally guaranteed loans to small businesses. These loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. The Company received notification the loan and accrued interest was forgiven on March 4, 2021.

Unison Revolving Line of Credit

The Company has a revolving line of credit (“LOC”) agreement which matures April 12, ~~2022~~2025. 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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the effective interest rate ~~for both periods~~ was 5.00% and ~~4.75~~4.75%%., respectively. The LOC is collateralized by all the business assets of ICS. As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, there were no0 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, stock awards 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 stock awards and 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 September 30,				Nine months ended September 30,				Three months ended March 31,
	2021		2020		2021		2020		2022		2021
Stock options	$	42	$	24	$	96	$	77	$	31	$	24
Stock awards		126		1		126		3		20		-
Restricted stock awards										-		1
Total	$	168	$	25	$	222	$	80	$	51	$	25

During the three months ended ~~September 30, 2021,~~ 0 ~~stock options were awarded. During the nine months ended September 30, 2021,~~March 31, 2022, 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~~1,500 shares of the Company’s common stock at a fair market value price of $~~12.62~~13.45 per share to an employee of the Company. ~~NaN~~ ~~additional shares were awarded during the nine months ended September 30, 2021.~~

During the three months ended ~~September 30, 2020, the Company awarded~~March 31, 2021, 0 stock options ~~to purchase~~ ~~2,000~~ ~~shares of the Company’s common stock at an exercise price of $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).~~were awarded.

~~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

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:	Total unrecognized compensation expense		Unvested stock options		Unvested restricted stock awards		Total unrecognized compensation expense
2021 (remaining three months)	$	37
2022		98
2022 (remaining nine months)			$	67	$	-	$	67
2023		40		40		-		40
2024		11		11		-		11
	$	186	$	118	$	-	$	118

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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.

~~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):~~follows:

Schedule of Stock Option Activity

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

Outstanding, December 31, 2020 105,086 $ 6.25 $ 6.06 5.38 $ 814,090
Granted 17,000 $ 14.77 $ 10.90 10.00
Exercised (18,045 ) $ 2.54 $ 13.39 1.40
Expired/Forfeited (2,556 ) $ 7.18 $ 6.88 6.98
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

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

Outstanding, December 31, 2021		100,235	$	8.36	$	7.53		5.88	$	620,445
Granted		-	$	-	$	-		-
Exercised		-	$	-	$	-		-
Expired/Forfeited		-	$	-	$	-		-
Outstanding, March 31, 2022		100,235	$	8.36	$	7.53		5.63	$	365,787
Exercisable, March 31, 2022		79,587	$	7.03	$	6.85		4.75	$	351,711
Unvested, March 31, 2022		20,648	$	13.50	$	10.14		9.04	$	14,076

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on ~~September 30, 2021~~March 31, 2022 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 ~~September 30, 2021.~~March 31, 2022.

~~Restricted~~ Stock Activity

~~Restricted~~Non-vested stock award 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):~~follows:

Schedule of Restricted Stock Activity Under Equity Incentive Plan

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

				Weighted avg.
	Number of			grant date
	options			fair value
Non-vested shares, December 31, 2021		-		$	-
Granted		1,500		$	13.45
Vested		(1,500	)	$	13.45
Forfeited		-		$	-
Non-vested shares, March 31, 2022		-		$	-

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 we recorded an income tax expense of approximately $~~298,000~~ ~~and $413,000~~163,000, ~~respectively,~~ compared to income tax expense of $~~271,000~~ ~~and $336,000~~11,000 for the same ~~2020 periods.~~2021 period. The effective tax rate for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 iswas favorably impacted by the non-taxability of the PPP loan forgiveness income.

~~Where Food Comes From, Inc.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~

Note 9 - Revenue Recognition

Disaggregation of Revenue

We have identified 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

	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		Three months ended March 31, 2022								Three months ended March 31, 2021
																			Verification and Certification Segment		Software Sales and Related Consulting Segment		Eliminations and Other		Consolidated Totals		Verification and Certification Segment		Software Sales and Related Consulting Segment		Eliminations and Other		Consolidated Totals

Revenues:
Verification and certification service revenue	$	11,659	$	-	$	-	$	11,659	$	10,218	$	-	$	-		$	10,218	$	3,784	$	-	$	-	$	3,784	$	3,263	$	-	$	-	$	3,263
Product sales		3,071		-		-		3,071		2,883		-		-			2,883		1,007		-		-		1,007		724		-		-		724
Software and related consulting revenue		-		1,396		-		1,396		-		1,538		(114	)		1,424		-		1,365		-		1,365		-		453		-		453
Total revenues	$	14,730	$	1,396	$	-	$	16,126	$	13,101	$	1,538	$	(114	)	$	14,525	$	4,791	$	1,365	$	-	$	6,156	$	3,987	$	453	$	-	$	4,440

Contract Balances

As of ~~September 30, 2021,~~March 31, 2022 and December 31, ~~2020,~~2021, accounts receivable from contracts with customers, net of allowance for doubtful accounts, ~~were~~was approximately $~~2.3~~2.2 ~~and $2.5~~ ~~million, respectively.~~million.

As of ~~September 30, 2021,~~March 31, 2022 and December 31, ~~2020,~~2021, deferred revenue from contracts with customers was approximately $~~1.6~~1.3 and $~~1.1~~1.5 million, respectively. The balance of the contract liabilities at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 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 ~~nine~~three month period ended ~~September 30, 2021~~March 31, 2022 (amounts in thousands):

Schedule of Changes in Contract with Customer Liabilities

(amounts in thousands):

Deferred revenue:
Unearned revenue January 1, 2021	$	1,132
Unearned revenue December 31, 2021				$	1,513
Unearned billings		3,320			1,771
Revenue recognized		(2,888	)		(2,007	)
Unearned revenue September 30, 2021	$	1,564
Unearned revenue March 31, 2022				$	1,277

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


	Three months ended March 31,
	2022		2021
Operating lease cost	$	123	$	116
Finance lease cost
Amortization of assets		2		2
Interest on finance lease obligations		1		1
Variable lease cost		-		-
Total net lease cost	$	126	$	119

Included in the table above, is $0.1 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~is $0.1~~ ~~and $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

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


	March 31, 2022						December 31, 2021
Operating leases:	Related Party		Other		Total		Related Party		Other		Total
Operating lease ROU assets	$	2,518	$	203	$	2,721	$	2,568	$	230	$	2,798

Current operating lease liabilities	$	206	$	108	$	314	$	201	$	112	$	313
Noncurrent operating lease liabilities		2,826		115		2,941		2,880		140		3,020
Total operating lease liabilities	$	3,032	$	223	$	3,255	$	3,081	$	252	$	3,333

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 %

	March 31, 2022			December 31, 2021
Finance leases:
Property and equipment, at cost	$	51		$	51
Accumulated amortization		(28	)		(26	)
Property and equipment, net	$	23		$	25

Current obligations of finance leases	$	12		$	13
Finance leases, net of current obligations		17			19
Total finance lease liabilities	$	29		$	32
Weighted average remaining lease term (in years):
Operating leases		8.9			9.1
Finance leases		2.9			3.1

Weighted average discount rate:
Operating leases		5.7	%		5.7	%
Finance leases		11.1	%		11.5	%

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

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 September 30, Nine months ended September 30,
2021 2020 2021 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 120 $ 113 $ 350 $ 335
Operating cash flows from finance leases $ 1 $ 1 $ 3 $ 4
Financing cash flows from finance leases $ 2 $ 2 $ 7 $ 6

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

~~Where Food Comes From, Inc.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~


	Three months ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	125	$	114
Operating cash flows from finance leases	$	1	$	1
Financing cash flows from finance leases	$	3	$	3

ROU assets obtained in exchange for lease liabilities:
Operating leases	$	3,110	$	3,531

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 (three remaining months)	$	121		$	4
2022		481			15
2022 (nine remaining months)							$	369		$	11
2023		468			10			480			10
2024		407			5			419			5
2025		405			5			417			6
2026								430			-
Thereafter		2,496			-			2,078			-
Total lease payments		4,378			39			4,193			32
Less amount representing interest		(1,026	)		(5	)		(938	)		(3	)
Total lease obligations		3,352			34			3,255			29
Less current portion		(302	)		(12	)		(314	)		(12	)
Long-term lease obligations	$	3,050		$	22		$	2,941		$	17

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.

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

The Company also determined that it has a software and related consulting reportable segment. SureHarvest, which includes Postelsia, is the sole operating ~~segment~~unit under the software and related consulting reportable segment. This segment includes software ~~license, maintenance, support~~ and ~~software-related~~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.

~~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 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

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
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 $ 11,659 $ - $ - $ 11,659 $ 10,218 $ - $ - $ 10,218
Product sales 3,071 - - 3,071 2,883 - - 2,883
Software and related consulting revenue - 1,396 - 1,396 - 1,538 (114 ) 1,424
Total revenues $ 14,730 $ 1,396 $ - $ 16,126 $ 13,101 $ 1,538 $ (114 ) $ 14,525
Costs of revenues:
Costs of verification and certification services 6,363 - - 6,363 5,373 - (90 ) 5,283
Costs of products 1,969 - - 1,969 1,869 - - 1,869
Costs of software and related consulting - 995 - 995 - 901 - 901
Total costs of revenues 8,332 995 - 9,327 7,242 901 (90 ) 8,053
Gross profit 6,398 401 - 6,799 5,859 637 (24 ) 6,472
Depreciation & amortization 448 153 - 601 313 423 - 736
Other operating expenses 4,463 226 - 4,689 4,206 483 (24 ) 4,665
Segment operating income/(loss) $ 1,487 $ 22 $ - $ 1,509 $ 1,340 $ (269 ) $ - $ 1,071
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) $ 1,582 $ 8 $ 629 $ 2,219 $ 1,447 $ (279 ) $ (328 ) $ 840

~~Where Food Comes From, Inc.~~

~~Notes to the Consolidated Financial Statements~~

~~(Unaudited)~~


	Three months ended March 31, 2022											Three months ended March 31, 2021
		Verification and Certification Segment		Software Sales and Related Consulting Segment			Eliminations and Other			Consolidated Totals			Verification and Certification Segment		Software Sales and Related Consulting Segment			Eliminations and Other			Consolidated Totals
Assets:
Goodwill	$	1,947	$	999		$	-		$	2,946		$	1,947	$	999		$	-		$	2,946
All other assets, net		14,860		3,815			(1,267	)		17,408			17,545		2,891			(3,694	)		16,742
Total assets	$	16,807	$	4,814		$	(1,267	)	$	20,354		$	19,492	$	3,890		$	(3,694	)	$	19,688

Revenues:
Verification and certification service revenue	$	3,784	$	-		$	-		$	3,784		$	3,263	$	-		$	-		$	3,263
Product sales		1,007		-			-			1,007			724		-			-			724
Software and related consulting revenue		-		1,365			-			1,365			-		453			-			453
Total revenues	$	4,791	$	1,365		$	-		$	6,156		$	3,987	$	453		$	-		$	4,440
Costs of revenues:
Costs of verification and certification services		2,036		-			-			2,036			1,793		-			-			1,793
Costs of products		537		-			-			537			457		-			-			457
Costs of software and related consulting		-		1,186			-			1,186			-		328			-			328
Total costs of revenues		2,573		1,186			-			3,759			2,250		328			-			2,578
Gross profit		2,218		179			-			2,397			1,737		125			-			1,862
Depreciation & amortization		145		50			-			195			151		51			-			202
Other operating expenses		1,513		66			-			1,579			1,479		92			-			1,571
Segment operating income/(loss)	$	560	$	63		$	-		$	623		$	107	$	(18	)	$	-		$	89
Other items to reconcile segment operating income (loss) to net income/(loss):
Other income / (expense)		49		(12	)		-			37			35		-			1,037			1,072
Income tax expense		-		-			(163	)		(163	)		-		-			(11	)		(11	)
Net income/(loss)	$	609	$	51		$	(163	)	$	497		$	142	$	(18	)	$	1,026		$	1,150

Note 13 – Supplemental Cash Flow Information

Schedule of Supplemental Cash Flow Information

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


	Three months ended March 31,
(Amounts in thousands)	2022		2021
Cash paid during the year:
Interest expense	$	-	$	1
Income taxes	$	-	$	-

Note 14 – Subsequent Events

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

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.~~2021. 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 estimates that is supports more than ~~15,000~~approximately 17,500 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,~~(“IMI”), Where Food Comes From Organic (“WFCFO” - previously International Certification Services and A Bee Organic), Validus Verification Services (“Validus”), and Sterling ~~Solutions, and A Bee Organic.~~Solutions. 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;~~LLC (“SureHarvest”) and Postelsia Holdings, Ltd. (“Postelsia”), we primarily 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 and technology solutions that ~~support our verification business and~~ generate incremental revenue specific to the food and agricultural ~~industry.~~industry and drive sustainable value creation.

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 (“NASDAQ”), 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~~The recent uptick in COVID-19 outbreaks has continued to impact our business. Due to safety and social distancing reasons, some customers have requested postponement of ~~novel coronavirus disease (“COVID-19”) as a pandemic.~~ ~~This could result in a variety of risks~~onsite visits. We continue to ~~our business including the inability to perform audits at~~work with our customers ~~locations due~~and standard setting bodies to ~~social distancing,~~identify innovative solutions. Additionally, in late 2021, we were informed by our key tag supplier ~~disruptions as a result~~that materials were becoming scarcer and the ability to meet our need was difficult. In anticipation of ~~business closures, food systems that are in disarray resulting in global food~~this risk, we worked with all our tag suppliers to build our inventory by purchasing excess supply. We believe we have reduced this risk, however, should material shortages ~~euthanasia~~continue to impact our tag suppliers, we may be unable to meet the needs of ~~animals and dumping of dairy products because farmers have no distribution channel, all of~~our customers which could ~~negatively influence~~materially impact 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.revenues.

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 COVID-19 situation closely and will react accordingly to any future restrictions or limitations, while keeping the interest of our customers and business in mind. ~~Due~~Please refer to our risk factors included in our Form 10-K for 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.~~fiscal year ended December 31, 2021 for additional information related to COVID-19.

Seasonality

Our business is subject to seasonal fluctuations. Significant portions of our verification and certification service revenue ~~are~~is 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 ~~September 30, 2021,~~March 31, 2022, we had cash and cash equivalents of approximately ~~$5.6~~$6.1 million compared to approximately ~~$4.4~~$5.4 million at December 31, ~~2020.~~2021. Our working capital at ~~September 30, 2021~~March 31, 2022 was approximately ~~$5.0~~$6.0 million compared to ~~$4.4~~$5.7 million at December 31, ~~2020.~~2021.

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was approximately ~~$3.0~~$1.1 million compared to ~~$2.2~~$1.2 million during the same period in ~~2020.~~2021. 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~~period ending ~~September 30, 2021 and 2020~~March 31, 2022 was primarily driven by a change in accrued expenses and ~~deferred revenue, offset~~prepaid expenses. The cash provided by ~~cash used~~operating activities for ~~inventory.~~the period ending March 31, 2021 was primarily driven by a change in accounts receivable, inventory and accrued expenses and other current liabilities.

Net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, was approximately ~~$0.2 million~~$16,000 compared to ~~$0.7~~$0.2 million in the ~~2020~~2021 period. Net cash used in the period ending ~~September 30,~~March 31, 2022 and 2021 was primarily for the ~~purchase~~further development of ~~a vehicle and equipment. Net cash used in the September 30, 2020 period was attributable to the acquisition of Postelsia Holdings, Ltd for $0.3 million and investment in software of $0.4 million.~~internal use software.

Net cash used in financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 was approximately ~~$1.6 million compared to net cash provided by financing activities of $0.5 million in the 2020 period.~~$0.4 million. Cash used for the ~~period~~periods ending ~~September 30,~~March 31, 2022 and 2021, was primarily due to the repurchase of common shares under the Stock Buyback Plan and dividends paid to shareholders. Cash provided for the period ending September 30, 2020, was primarily from proceeds from the PPP loan of $1.0 million, offset by $0.5 million for the repurchase of common shares under the Stock Buyback Plan.

Over the past several years, our growth has been funded primarily through cashflows from operations. We continually evaluate all funding options, including additional offerings of our securities to private, public and institutional investors and other credit facilities as they become available.

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, gross margin 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 and bundling opportunities 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.~~2025. 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 ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, the effective interest rate was 5.00% and 4.75%, respectively. The LOC is collateralized by all the business assets of Where Food Comes From Organic, Inc. (“WFCFO”). As of ~~September 30, 2021,~~March 31, 2022, and December 31, ~~2020,~~2021, 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 ~~September 30, 2021,~~March 31, 2022, we had no off-balance sheet arrangements of any type.

RESULTS OF OPERATIONS

Three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 compared to the same ~~periods~~period in fiscal year ~~2020~~2021

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

	Three months ended September 30, 2021											Three months ended September 30, 2020											Three months ended March 31, 2022											Three months ended March 31, 2021
		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 Sales and Related Consulting Segment			Eliminations and Other			Consolidated Totals			Verification and Certification Segment		Software Sales and Related Consulting Segment			Eliminations and Other			Consolidated Totals
Assets:
Goodwill	$	1,947	$	999		$	-		$	2,946		$	2,946	$	-		$	-		$	2,946		$	1,947	$	999		$	-		$	2,946		$	1,947	$	999		$	-		$	2,946
All other assets, net		17,036		3,311			(2,778	)		17,569			16,548		5,379			(4,612	)		17,315			14,860		3,815			(1,267	)		17,408			17,545		2,891			(3,694	)		16,742
Total assets	$	18,983	$	4,310		$	(2,778	)	$	20,515		$	19,494	$	5,379		$	(4,612	)	$	20,261		$	16,807	$	4,814		$	(1,267	)	$	20,354		$	19,492	$	3,890		$	(3,694	)	$	19,688

Revenues:
Verification and certification service revenue	$	4,701	$	-		$	-		$	4,701		$	4,307	$	-		$	-		$	4,307		$	3,784	$	-		$	-		$	3,784		$	3,263	$	-		$	-		$	3,263
Product sales		1,383		-			-			1,383			1,362		-			-			1,362			1,007		-			-			1,007			724		-			-			724
Software and related consulting revenue		-		461			-			461			-		528			-			528			-		1,365			-			1,365			-		453			-			453
Total revenues	$	6,084	$	461		$	-		$	6,545		$	5,669	$	528		$	-		$	6,197		$	4,791	$	1,365		$	-		$	6,156		$	3,987	$	453		$	-		$	4,440
Costs of revenues:
Costs of verification and certification services		2,438		-			-			2,438			2,233		-			-			2,233			2,036		-			-			2,036			1,793		-			-			1,793
Costs of products		864		-			-			864			866		-			-			866			537		-			-			537			457		-			-			457
Costs of software and related consulting		-		315			-			315			-		336			-			336			-		1,186			-			1,186			-		328			-			328
Total costs of revenues		3,302		315			-			3,617			3,099		336			-			3,435			2,573		1,186			-			3,759			2,250		328			-			2,578
Gross profit		2,782		146			-			2,928			2,570		192			-			2,762			2,218		179			-			2,397			1,737		125			-			1,862
Depreciation & amortization		149		51			-			200			112		145			-			257			145		50			-			195			151		51			-			202
Other operating expenses		1,542		48			-			1,590			1,404		145			-			1,549			1,513		66			-			1,579			1,479		92			-			1,571
Segment operating income/(loss)	$	1,091	$	47		$	-		$	1,138		$	1,054	$	(98	)	$	-		$	956		$	560	$	63		$	-		$	623		$	107	$	(18	)	$	-		$	89
Other items to reconcile segment operating income/(loss) to net income/(loss):
Other income/(expense)		29		(2	)		-			27			47		(2	)		-			45
Other items to reconcile segment operating income (loss) to net income/(loss):
Other income / (expense)																								49		(12	)		-			37			35		-			1,037			1,072
Income tax expense		-		-			(298	)		(298	)		-		(8	)		(263	)		(271	)		-		-			(163	)		(163	)		-		-			(11	)		(11	)
Net income/(loss)	$	1,120	$	45		$	(298	)	$	867		$	1,101	$	(108	)	$	(263	)	$	730		$	609	$	51		$	(163	)	$	497		$	142	$	(18	)	$	1,026		$	1,150

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. F~~ees~~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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 increased ~~9.2% and 14.1%, respectively,~~16.0% compared to ~~2020,~~the same period in 2021, 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 increased ~~1.5% and 6.5%, respectively. Overall, our product sales have increased primarily in response~~39.0% compared to the ~~requirement for source~~same period in 2021, primarily due to increased pricing, increased demand and ~~age verification using an identification tag at birth for cattle.~~limited supply elsewhere in the market.

Costs of revenues for our verification and certification segment for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 were approximately ~~$2.4~~$2.0 million ~~and $6.4 million, respectively,~~ compared to approximately ~~$2.2~~$1.8 million ~~and $5.3 million (including eliminations), respectively,~~ for the same ~~periods~~period in ~~2020.~~2021. Gross margin for the three months ended ~~September 30, 2021 increased to 45.7%~~March 31, 2022 was 46.3% compared to ~~45.3% (including eliminations) for the same period ended September 30, 2020. Gross margin for the nine months ended September 30,~~43.6% in 2021 ~~decreased to 43.4% compared to 44.0% (including eliminations) 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 and new 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 slightly increased by approximately ~~9.8% and 6.6%, respectively,~~2.3% compared to the same three ~~and nine~~ month ~~periods~~period in ~~2020~~2021. The increase was primarily due to increased ~~discretionary~~ compensation expense ~~and public listing costs not incurred during the same periods~~related to an increase in ~~2020.~~headcount. Depreciation and amortization expense for the three ~~and nine~~ months ended ~~September 30, 2021 increased 33.0% and 43.1%, respectively,~~March 31, 2022 decreased 4.0% compared to the same three ~~and nine~~ month ~~periods~~period 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.~~2021.

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~~primarily represents fees earned from a wide range of professional consulting services ~~such as professional appearances, customer education~~ and ~~training,~~technology solutions that support our verification business and generate incremental revenue specific to the food and agricultural industry. ~~For~~Software and related consulting revenue for the three months ended ~~September 30, 2021, software and related consulting revenue was decreased $0.1 million~~March 31, 2022 increased approximately 201.3% compared to ~~2020 (including eliminations). For~~ the ~~nine months ended September 30, 2021, software~~same period in 2021. The three month increase is due to a significant short-term engagement with a Japanese party to promote Japanese seafood products into the American supply chain. While we are hopeful that the engagement will be an annual recurring source of revenue for our consulting segment, as well as a potential opportunity for our verification and ~~related consulting revenue~~certification segment, we can give no assurance that it will be an ongoing source of revenue. Additionally, because this was ~~relatively flat compared to 2020 (including eliminations).~~a short-term engagement, it is not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Costs of revenues for our software and related consulting segment for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and September 30, 2020~~ was approximately ~~$0.3 million. The cost of revenues for the nine months ended September 30, 2021~~$1.2 and ~~September 30, 2020 was $1.0 million and $0.9~~$0.3 million, respectively. Gross margin for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 decreased to ~~31.7% and 28.7%, respectively,~~13.1% compared to ~~36.4% and 44.7% (including eliminations)~~27.6% for the same period in ~~2020.~~2021. The three ~~and nine~~ month decrease in gross margin is due primarily to increased cost of contract labor to support ~~our enhancements to our customer’s technology.~~the short-term consulting engagement mentioned above.

Other operating expenses for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 decreased approximately ~~66.9% and 53.2%, respectively,~~28.3% compared to the same period in ~~2020 (including eliminations).~~2021. Depreciation and amortization for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 decreased ~~64.8% and 63.8%, respectively,~~2.0% compared to the same three ~~and nine~~ month ~~periods~~period in ~~2020.~~2021. The decrease is predominately due to ~~the decrease~~a reduction in ~~depreciation, amortization and personnel costs from shifting certain assets and personnel from SureHarvest to WFCF~~headcount resulting in ~~2020 to better support the entire Company.~~less compensation expense.

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~~We have learned that it can take two to three years after an acquisition to fully understand the complexities, at which time, we have seen solid improvements 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.revenues and/or costs.

Dividend Income from Progressive Beef

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company received dividend income of ~~$30,000~~$50,000 and ~~$90,000,~~$30,000, 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 nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we recorded income tax expense of approximately ~~$298,000 and $413,000, respectively,~~$163,000 compared to income tax expense of ~~$271,000 and $336,000, respectively,~~$11,000 for the same ~~periods~~period in ~~2020.~~2021. The effective tax rate for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 iswas 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 was approximately ~~$0.9~~$0.5 million and ~~$2.2 million, respectively, and $0.14 and $0.36, respectively,~~$0.08 per basic and diluted common share, respectively, compared to net income of approximately ~~$0.7~~$1.2 million and ~~$0.8 million, respectively, or $0.12 per basic and diluted common shares for the three months ended September 30, 2020 and $0.14 and $0.13~~$0.19 per basic and diluted common share for the ~~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,~~same period in 2021.

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.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

Our business is subject to a number of risks, including those identified in Item 1A. — “Risk Factors” of our ~~2020~~2021 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 ~~September 30, 2021,~~March 31, 2022, the Company recognizes the coronavirus pandemic may have ana continued economic impact on the Company, but management does not know and cannot estimate what the long-term 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 ~~September 30, 2021~~March 31, 2022 is as follows:

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 of Shares Cost of Shares (in thousands) Average Cost per Share
Shares purchased - January 2022 9,550 $ 135 $ 14.17
Shares purchased - February 2022 15,000 178 $ 11.85
Shares purchased - March 2022 9,000 109 $ 12.11
Total 33,550 $ 422 $ 12.58

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
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
27 22
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: ~~November 4, 2021~~May 12, 2022 Where Food Comes From, Inc.
By: /s/ John K. Saunders
Chief Executive Officer
By: /s/ Dannette Henning
Chief Financial Officer

28 23

(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

	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

	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 of Shares		Cost of Shares (in thousands)		Average Cost per Share
Shares purchased - January 2022		9,550	$	135	$	14.17
Shares purchased - February 2022		15,000		178	$	11.85
Shares purchased - March 2022		9,000		109	$	12.11
Total		33,550	$	422	$	12.58

	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
	101.INS		Inline XBRL Instance Document

	101.SCH		Inline XBRL Taxonomy Extension Schema Document

	101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

	101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

	101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

	101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

	104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

Date: ~~November 4, 2021~~May 12, 2022	Where Food Comes From, Inc.

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