Where Food Comes From Inc

Previous wording

Our greatest asset is our people, and we continue to attract the best and brightest with our competitive pay and benefits package. As of March 31, 2024, we had 103 total employees, of which 89 were full-time employees. Approximately 82% of our workforce is comprised of female and other minority employees.

Current wording

Our greatest asset is our people, and we continue to attract the best and brightest with our competitive pay and benefits package. As of June 30, 2024, we had 104 total employees, of which 89 were full-time employees. Approximately 85% of our workforce is comprised of female and other minority employees.

Previous wording

Additionally, the cattle industry is cyclical by nature based on factors impacting current and future supplies such as drought-induced feedlot placements, higher cow and heifer slaughter, and lower auction receipts. The production lags inherent to this industry lead to long-lasting impacts of production decisions. For example, increased liquidation implies tighter supplies for next year. Similarly, times of herd expansion are typically a multi-year period. These cycles typically last roughly 10 years. The current cycle began in 2014 and we believe we are currently in the contraction phase of the cycle after peaking in 2018-2019. How long we continue to contract will be directly impacted by drought and pasture conditions.

Current wording

Additionally, the cattle industry is cyclical by nature based on factors impacting current and future supplies such as drought-induced feedlot placements, higher cow and heifer slaughter, and lower auction receipts. The production lags inherent to this industry lead to long-lasting impacts of production decisions. For example, increased liquidation implies tighter supplies for next year. Similarly, times of herd expansion are typically a multi-year period. These cycles typically last roughly 10 years. The current cycle began in 2014 and we believe we are currently in the contraction phase of the cycle after peaking in 2018-2019. How long we continue to contract will be directly impacted by drought, pasture conditions, supply and demand.

Previous wording

At March 31, 2024, we had cash and cash equivalents of approximately $1.9 million compared to approximately $2.6 million at December 31, 2023. Our working capital at March 31, 2024 and December 31, 2023 was approximately $2.1 million and $3.2 million, respectively.

Current wording

At June 30, 2024 and December 31, 2023, we had cash and cash equivalents of approximately $2.6 million. Our working capital at June 30, 2024 and December 31, 2023 was approximately $2.3 million and $3.2 million, respectively.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 was approximately $0.7 million compared to $0.5 million during the same period in 2023. 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, and deferred taxes. Fluctuations are primarily due to operating performance offset by the timing of cash receipts and cash disbursements. The cash provided by operating activities for the period ending March 31, 2024 compared to the same period in 2023 was primarily driven by an increase in operating performance.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 was approximately $1.9 million compared to $1.3 million during the same period in 2023. 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, and deferred taxes. Fluctuations are primarily due to operating performance offset by the timing of cash receipts and cash disbursements. The cash provided by operating activities for the period ending June 30, 2024 compared to the same period in 2023 was primarily driven by an increase in operating performance.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was approximately $24,000 compared to $0.2 million in the 2023 period. Net cash used in the period ending March 31, 2023 was primarily related to our equity investment in BlueTrace.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was approximately $91,000 compared to $0.2 million in the 2023 period. Net cash used in the period ending June 30, 2023 was primarily related to our equity investment in BlueTrace.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 and 2023 was approximately $1.4 million and $1.2 million, respectively. Cash used for the period ending March 31, 2024, was primarily due to the retirement of stock and the repurchase of common shares under the Stock Buyback Plan. Cash used for the period ending March 31, 2023, was primarily due to the repurchase of common shares under the Stock Buyback Plan.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 and 2023 was approximately $1.8 million and $2.0 million, respectively. Cash used for the period ending six months ended June 30, 2024, was primarily due to a private purchase of our common shares and the repurchase of common shares under the Stock Buyback Plan. Cash used for the period ending June 30, 2023, was primarily due to the repurchase of common shares under the Stock Buyback Plan.

Previous wording

Three months ended March 31, 2024 compared to the same period in fiscal year 2023

Current wording

Three and six months ended June 30, 2024 compared to the same period in fiscal year 2023

Previous wording

Verification and certification service revenues consist of fees charged for verification audits and other verification and certification related services that the Company performs for customers. Fees earned from our WFCF labeling program are also included in our verification and certification revenues as it represents a value-added extension of our source verification. We are recognized and utilized by numerous standard-setting bodies as an accredited verification or certification service provider. We enable food producers and brands to make certain claims on live animals or packaged food products by verifying that they are meeting the standards or guidelines associated with the claim(s) they are making. Verification and certification service revenue for the three months ended March 31, 2024 increased 16.5% compared with the same period in 2023. While our verification and certification service revenue continues to improve due to new customer growth and bundling opportunities, we believe we are in a low point of a contraction phase within the cattle cycle which negatively impacts revenue tied directly to price per head of cattle.

Current wording

Verification and certification service revenues consist of fees charged for verification audits and other verification and certification related services that the Company performs for customers. Fees earned from our WFCF labeling program are also included in our verification and certification revenues as it represents a value-added extension of our source verification. We are recognized and utilized by numerous standard-setting bodies as an accredited verification or certification service provider. We enable food producers and brands to make certain claims on live animals or packaged food products by verifying that they are meeting the standards or guidelines associated with the claim(s) they are making. Verification and certification service revenue for the three and six months ended June 30, 2024 increased 9.9% and 12.8%, respectively, compared with the same periods in 2023. While our verification and certification service revenue continues to improve due to new customer growth and bundling opportunities, we believe we are in a low point of a contraction phase within the cattle cycle which negatively impacts revenue tied directly to price per head of cattle.

Previous wording

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 months ended March 31, 2024 slightly decreased $0.2 million, compared to the same period in 2023. We continue to see some new customer growth, but our customers are ordering less tags due to smaller beef cow herd size. According to the USDA July 2023 statistics, overall beef cow inventories have declined over 3% compared to last year. As mentioned above, we believe we are at a low point of a contraction phase within the cattle cycle which negatively impacts revenue tied directly to price per head of cattle..

Current wording

Our product sales are an ancillary part of our verification and certification services and represent sales of cattle identification ear tags. Product sales for the three and six months ended June 30, 2024 slightly decreased $0.1 million and $0.4 million, respectively, compared to the same period in 2023. We continue to see some new customer growth, but our customers are ordering less tags due to smaller beef cow herd size. According to the USDA July 2023 statistics, overall beef cow inventories have declined over 3% compared to last year. As mentioned above, we believe we are at a low point of a contraction phase within the cattle cycle which negatively impacts revenue tied directly to price per head of cattle.

Previous wording

Segment costs of revenues for the three months ended March 31, 2024 were approximately $2.9 million compared to approximately $2.8 million for the same period in 2023. Gross margin for the three months ended March 31, 2024 was 42.9% compared to 42.1% in 2023. The slight improvement was primarily driven by higher margin verification services offset by increases in cost of product sales. Our margins are generally impacted by various fixed costs such as cost of products, salaries and benefits, insurance and taxes.

Current wording

Segment costs of revenues for the three and six months ended June 30, 2024 were approximately $3.5 million and $6.4 million, respectively, compared to approximately $3.3 million and $6.0 million, respectively for the same periods in 2023. Gross margin for the three months ended June 30, 2024 and 2023 was 42.4%, while the gross margin for the six months ended June 30, 2024 and 2023 was 42.6% and 42.3%, respectively. The slight improvement was primarily driven by higher margin verification services offset by increases in cost of product sales. Our margins are generally impacted by various fixed costs such as cost of products, salaries and benefits, insurance and taxes.

Previous wording

Other operating expenses for the three months ended March 31, 2024 increased by approximately $0.1 million, compared to the same three month period in 2023. The increase was primarily due to costs incurred to expand our marketing efforts both nationally and internationally

Current wording

Other operating expenses for the three and six months ended June 30, 2024 increased by approximately $0.3 million, for both periods, compared to the same three and six month periods in 2023. The increase was primarily due to costs incurred to expand our marketing efforts both nationally and internationally.

Previous wording

Professional services includes a wide range of professional consulting, data analysis, reporting and technology solutions that support our verification business and generate incremental revenue specific to the food and agricultural industry. Professional services revenue for the three months ended March 31, 2024 decreased less than $0.1 million, compared to the same period in 2023.

Current wording

Professional services includes a wide range of professional consulting, data analysis, reporting and technology solutions that support our verification business and generate incremental revenue specific to the food and agricultural industry. Professional services revenue for the three and six months ended June 30, 2024 decreased less than $0.1 million and $0.2 million, respectively, compared to the same periods in 2023.

Previous wording

Costs of revenues for our professional services segment for the three months ended March 31, 2024 and 2023 was approximately $0.3 million and $0.4 million, respectively. Gross margin for the three months ended March 31, 2024 remained relatively flat at 26.7% compared to 26.5% for the same period in 2023.

Current wording

Costs of revenues for our professional services segment for the three and six months ended June 30, 2024 was approximately $0.2 million and $0.5 million, respectively, compared to approximately $0.3 million and $0.7 million, respectively, for the same periods in 2023. Gross margin for the three and six months ended June 30, 2024 remained relatively flat at 25.9% and 26.4%, respectively, compared to 19.6% and 23.4% for the same periods in 2023.

Previous wording

For the three months ended March 31, 2024, the Company did not receive any dividend income from Progressive Beef. For the three months ended March 31, 2023, the Company received dividend income of $50,000, from Progressive Beef representing a distribution of their earnings.

Current wording

For the three and six months ended June 30, 2024, the Company received dividend income from Progressive Beef of $0.1 million. For the three and six months ended June 30, 2023, the Company received dividend income of $50,000 and $100,000, respectively, from Progressive Beef representing a distribution of their earnings.

Previous wording

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 months ended March 31, 2024, we recorded income tax expense of approximately $87,000 compared to income tax expense of $90,000 for the same period in 2023.

Current wording

The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. For the three and six months ended June 30, 2024 and 2023, we recorded income tax expense of approximately $0.2 million and $0.3 million, respectively.

Previous wording

As a result of the foregoing, net income attributable to WFCF shareholders for the three months ended March 31, 2024 was approximately $0.2 million and $0.03 per basic and diluted common share, respectively, compared to net income of approximately $0.1 million and $0.02 per basic and diluted common share for the same period in 2023.

Current wording

As a result of the foregoing, net income attributable to WFCF shareholders for the three and six months ended June 30, 2024 and 2023 was approximately $0.5 million and $0.7 million, respectively, and $0.09 and $0.12, respectively, per basic share common share and $0.09 and $0.12 per diluted common share for the three and six months ended June 30, 2024 and $0.09 and $0.11 per diluted common share for the three and six months ended June 30, 2023.