Where Food Comes From, Inc.

Consolidated Statements of Operations

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Consolidated Statement of Equity

Consolidated Statement of Equity

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 and aquaculture products are accurate. We care about food and other agricultural and aquacultural 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 a wide range of professional consulting services that generate incremental revenue specific to the food and agricultural 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”) andinclude 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”), SureHarvest Services, LLC (“SureHarvest”), 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, 2024, included in our Form 10-K filed on February 20, 2025. 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, 2025 are not necessarily indicative of the results to be expected for any other interim period of any future year.

Seasonality

Our business is subject to seasonal fluctuations annually. 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.

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. Historically, these cycles typically lasted approximately 10 years. The beginning of 2025 marked the eleventh year of the current cycle that began in 2014. We are currently in the contraction phase of the cycle after peaking in 2018-2019. How long we will continue to contract will be directly impacted by drought and pasture conditions.

Because of the seasonality of the business and cyclical nature of 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.

In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), to clarify the initial effective date. The Company will be required to adopt this update January 1, 2027 for annual reporting and January 1, 2028 for interim reporting. At this time, management is determining the extent of enhanced disclosures on its financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software, to modernize the accounting for software costs that are accounting for under Subtopic 350-40, Intangibles – Goodwill and Other – Internal-Use Software. The Company will be required to adopt this update January 1, 2028 for annual and interim reporting, with early adoption permitted. At this time, management is determining the impact on its financial statements.

Note 2 –Basic and Diluted Net Income per Share

Basic net income 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 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 per share computations (amounts in thousands):

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.

Note 3 –Equity Investments

For each of the three months ended September 30, 2025 and 2024, the Company received dividend income from Progressive Beef of $50,000, representing a distribution of their earnings. For the nine months ended September 30, 2025 and 2024, the Company received dividend income from Progressive Beef of $100,000 and $150,000, respectively, representing a distribution of their earnings. The income is reflected within the “Other income/(expense)” section of the Company’s Consolidated Statement of Operations for the three and nine months ended September 30, 2025 and 2024.

On July 22, 2025, the Company entered into a Redemption and Purchase Agreement (the “Agreement”) with Progressive Beef, LLC and BHS, LLC (the “Buyer”). Pursuant to the Agreement, the Buyer redeemed the 10% membership interests in Progressive Beef owned by the Company effective as of June 30, 2025, in exchange for approximately $1.8 million cash and the Buyer’s surrender of 12,585 shares of the Company’s common stock. The transaction resulted in approximately a $0.9 million gain on the sale of our investment recorded in the Other Income / Expense section of the Consolidated Statement of Operations for the three months ended September 30, 2025. The Buyer and the Company each made customary representations and warranties in the Agreement.

Note 4 –Intangible and Other Assets

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

Note 5 –Digital Assets

Effective January 1, 2024, the Company early adopted ASU 2023-08, which required entities to measure digital assets or “cryptocurrencies” at fair value with changes recognized in the Consolidated Statements of Income each reporting period.

The following table presents the Company’s digital asset holdings as of September 30, 2025:

The following table presents a roll-forward of total digital assets for the nine months ended September 30, 2025:

Note 6 –Accrued Expenses and Other Current Liabilities

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

Note 7 –Notes Payable

Unison Revolving Line of Credit

The Company had a revolving line of credit (“LOC”) agreement which matured on April 12, 2025. The LOC provided for $75,080 in working capital. The interest rate was at the Wall Street Journal prime rate plus 1.50% and was adjusted daily. Principal and interest were payable upon demand, but if demand was not made, then annual payments of accrued interest only were due, with the principal balance due onmaturity. As of December 31, 2024, the effective interest rate was 9.0%. The LOC was collateralized by all the business assets of Where Food Comes From Organic, Inc. (“WFCFO”). As of December 31, 2024, there wereno amounts outstanding under this LOC. The Company decided not to renew the LOC at April 12, 2025.

Note 8 –Equity and 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, 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 recognized for the three and nine month period ended September 30, 2024 was $0 and $11,000, respectively. All compensation cost from unvested awards was recognized as of March 31, 2024.

During the three and nine months ended September 30, 2025 and 2024, no stock options or common stock were awarded.

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.

Stock Option Activity

Stock option activity under our Equity Incentive Plans is summarized as follows:

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, 2025 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, 2025.

Private Purchase of Common Shares

During March 2024, the Company purchased 80,201 shares of its common stock from one shareholder for approximately $1.0 million. The purchase was limited to this single shareholder who approached the company; it was privately negotiated and involved no solicitation or advertising. No fees were paid in connection with the transaction, as it was a non-brokered placement. The shares were immediately retired upon purchase.

Cancellation of Treasury Shares

In April 2025, the Company canceled 1,237,700 shares of outstanding common stock held as treasury shares on the Consolidated Balance Sheet. The cancellation of these shares resulted in approximately $13.8 million being transferred from Treasury stock to Additional paid-in capital ($11.4 million) and Retained earnings ($2.4 million).

Note 9 –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 months ended September 30, 2025 and 2024 we recorded an income tax expense of approximately $0.5 million and $0.2 million, respectively. For the nine months ended September 30, 2025 and 2024 we recorded an income tax expense of approximately $0.7 million and $0.5 million, respectively.

Note 10 -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) professional services revenue.

Revenue attributable to each of our identified revenue categories is disaggregated in the table below (amounts in thousands).

Contract Balances

As of September 30, 2025 and December 31, 2024, accounts receivable from contracts with customers, net of allowance for doubtful accounts, was approximately $2.3 million and $1.8 million, respectively.

As of September 30, 2025 and December 31, 2024, deferred revenue from contracts with customers was approximately $2.0 million and $1.7 million, respectively. The balance of the contract liabilities at September 30, 2025 and December 31, 2024 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 month period ended September 30, 2025 (amounts in thousands):

Note 11 –Leases

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

Included in the table above, for the three and nine months ended September 30, 2025 and 2024, is $0.1 million 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% jointly-held ownership interest in The Move, LLC.

Supplemental balance sheet information related to leases was as follows (amounts in thousands):

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

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

Note 12 –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 13 -Segments

Effective January 2025, our operations team implemented some internal restructuring and consolidation throughout the Company to better align business functions and improve efficiency, as well as promote stronger unity in our brand identity because of our many past acquisitions. With this reorganization, we also needed to reassess segment reporting, our new structure and what type of discrete information was reviewed by our middle managers and our Chief Operating Decision Maker (“CODM”). One aspect of our restructuring specifically addressed the activities and personnel, which were previously reported under our Professional Services Segment. All professional consulting services, which also includes data analysis and other reporting metrics, provide support to our primary activities of verification and certification. This segment now reports to the same management team under the Verification and Certification Segment. With our restructuring, we now only have one reportable segment. The factors considered in determining this aggregated reporting segment include the economic similarity of the businesses, the nature of services provided, production processes, types of customers and distribution methods.

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

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

Note 14 –Supplemental Cash Flow Information

Note 15 –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.