Where Food Comes From, Inc.

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 produce 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 services and technology solutions 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 consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). 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. Actual results could differ from the estimates.

Our consolidated financial statements include the accounts of all majority-owned or controlled subsidiaries, and 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.

Note 2 -Summary of Significant Accounting Policies

**Cash and Cash Equivalents **

We place our cash with high quality financial institutions. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit; however, we have not experienced any losses related to balances that exceed such FDIC insurance limits (currently $250,000), and we believe our credit risk is minimal. At times, we may also invest in short-term investments with original maturities of three months or less, which we consider to be cash and cash equivalents, since they are readily convertible to cash.

Revenue Recognition

Verification and Certification Revenue

We offer a range of products and services to maintain identification, traceability, and verification systems. We conduct 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 generate revenue primarily from the sale of our verification solutions, consulting services and hardware sales. We sell our products and services directly to customers at various levels in the livestock and agricultural supply chains.

Verification and certification service revenue primarily consists of fees charged for verification audits and other verification services that the Company performs for customers. We recognize revenue utilizing an input method to measure over-time progress of each verification audit based on the number of audit days performed.

For certain of our third-party crop and other processed product audits, we assess a fixed fee for the annual certification period. We recognize revenue utilizing an input method to measure progress toward satisfaction of the annual assessment based on the percentage of activities/phases or input reviews completed under the annual assessment.

Product Sales Revenue

Product sales are primarily generated from the sale of cattle identification ear tags. Revenue for product sales is recognized upon delivery of the goods to customer, at which point title, custody and risk of loss transfer to the customer.

Professional Services Revenue

Professional services, data analysis and other reporting fees are derived from a standard rate card by employee level, and we invoice for services monthly on a time-incurred basis. We recognize revenue over time utilizing the practical expedient that allows us to recognize revenue in the amount to which we have a right to invoice.

Other

Generally, we do not provide right of return or warranty on product sales or services performed.

In connection with the provision of on-site audits, reimbursable expenses are incurred and billed to customers, and such amounts are recognized on a gross basis as both revenue and cost of revenue.

Any amounts collected on behalf of a third-party and remitted in full to that third-party are excluded from the transaction price and, thus, revenue.

Our business is subject to seasonal fluctuations. Significant portions of our verification and certification service revenue is typically realized during late May through early October when the calf marketings and the growing seasons are at their peak. Although this seasonality does not impact our policies for revenue recognition, it does generally impact our results of operations by potentially causing an increase in our profit margins during May through October and decreased margins during November through April. 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 marks 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 continue to contract will be directly impacted by drought and pasture conditions.

Disaggregation of Revenue

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

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

As of December 31, 2025 and 2024, accounts receivable from contracts with customers, net of allowance for doubtful accounts, were approximately $1.7 million and $1.8 million, respectively.

As of December 31, 2025 and 2024, deferred revenue from contracts with customers were approximately $1.5 million and $1.7 million, respectively. The balance of the contract liabilities at December 31, 2024 was recognized as revenue in 2025 and the balance at December 31, 2025 is expected to be recognized as revenue during 2026.

The following table reflects the changes in our contract liabilities during the year ended December 31, 2025 and 2024:

For the years ended December 31, 2025 and 2024, no single customer accounted for greater than 10% of our revenue.

Cost of Revenues

Salaries and related fringe benefits directly associated with our verification and certification service revenues are allocated to costs of verification and certification services.

Costs of products primarily represents the cost of livestock EID ear tags generally used in connection with our verification programs.

Costs of professional services include direct costs of salaries and related fringe benefits, and fees incurred from other service providers directly related to our professional services revenue.

Accounts Receivable and Allowance for Doubtful Accounts

Our receivables are generally due from trade customers. Credit is extended based on our evaluation of the customer’s financial condition, and generally collateral is not required. Accounts receivable are generally due approximately 30 days from the invoice date and are stated at amounts due from customers, net of an allowance for doubtful accounts. Accounts receivable that are outstanding longer than the contractual payment terms are considered past due. We determine our allowance by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss and payment history, the customer’s current ability to pay its obligations to us and the condition of the general economy and the industry as a whole. We write-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The allowance for doubtful accounts was approximately $93,000 and $64,000, respectively, at December 31, 2025 and 2024.

At December 31, 2025, there was one customer with a balance greater than 10% of our accounts receivable balance. At December 31, 2024, no single customer accounted for greater than 10% of our accounts receivable balance.

**Fair Value Measurements **

ASC Topic 820, Fair Value Measurements and Disclosure, establishes a hierarchy for inputs used in measuring fair value for financial assets and liabilities that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

Our assets and liabilities that were measured at fair value on a recurring basis were as following (in thousands):

The Company’s non-recurring fair value measurements include purchase price allocations for the fair value of assets and liabilities acquired through business combinations.

The acquisition of a group of assets in a business combination transaction requires fair value estimates for assets acquired and liabilities assumed. The fair value of assets and liabilities acquired through business combinations is calculated using a discounted future cash flows method. The discounted cash flows are developed using the income approach in which a value (based on management’s expectations for the future) is determined by converting anticipated benefits. The fair value measurements are based on significant inputs not observable in the market and thus represent fair value measurements which are designated as Level 3 inputs within the fair value hierarchy. Key assumptions and considerations include:

Other Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value due to their short maturities. The carrying values shown for short-term investments, long-term investments and notes payable also approximate fair value because current interest rates and terms offered to us for similar instruments are substantially the same (Level 2 inputs).

Inventory

Inventory consists of cattle identification ear tags and tag readers, which are recorded at the lower of cost or market value, with the cost calculated using the first-in-first-out (FIFO) method. Market value represents the estimated selling price.

We do not manufacture any of the items in inventory. All items in inventory are finished goods. As of December 31, 2025, there is no indication of obsolescence or impairment of inventory. No items in inventory have been pledged as security.

**Property and Equipment **

Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful-lives of the respective assets. Leasehold improvements are depreciated over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful-lives of the assets, in accordance with ASC842. All other property and equipment have depreciable lives which range fromtwo tofive years. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and the related gain or loss is reflected in earnings.

Digital Assets

Digital assets or “cryptocurrency” are included in non-current assets in the Consolidated Balance Sheets due to the Company’s investment in digital assets. The Company does not accept or receive digital assets for transactional purposes. We have ownership of and control over our digital assets and use a third-party custodial service to secure it.

Effective January 1, 2024, the Company measures the digital assets at fair value with changes recognized in net income each reporting period. See Note 5 for implementation accounting.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses at the acquisition date, after amounts allocated to other identifiable intangible assets. Factors that contribute to the recognition of goodwill include synergies that are specific to our business and not available to other market participants and are expected to increase net sales and profits; acquisition of a talented workforce; cost savings opportunities; the strategic benefit of expanding our presence in core and adjacent markets; and diversifying our product portfolio.

The fair values of other identifiable intangible assets are determined using the income approach or fair value measurement. Other intangible assets include, but are not limited to, developed technology, customer relationships, accreditations, tradenames/trademarks, and patents. Intangible assets with determinable useful-lives are amortized on a straight-line basis over their estimated useful-lives oftwo to 15 years. Certain acquired trade names are considered to have indefinite lives and are not amortized but are assessed at least annually for potential impairment as described below.

**Goodwill, Intangibles and Long-Lived Asset Impairment Tests **

We perform our annual impairment test for goodwill in the fourth quarter of each year. We consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill. In certain circumstances, we may also utilize a discounted cash flow analysis that requires certain assumptions and estimates be made regarding market conditions and our future profitability. Indefinite-lived intangible assets are also tested at least annually for impairment by comparing the individual carrying values to the fair value.

We review long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, or at least annually. The evaluation is performed at the lowest level of identifiable cash flows. Undiscounted cash flows expected to be generated by the related assets are estimated over the asset’s useful life based on updated projections. If the evaluation indicates that the carrying amount of the asset may not be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.

Research and Development and Software Development Costs

Research and development costs are charged to operations as incurred. We did not incur any research and development expense in 2025 and 2024.

Internal use software development costs represent the capitalization of certain external and internal computer software costs incurred during the application development stage. The application development stage is characterized by software design and configuration activities, coding, testing and installation. Training costs and maintenance are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality.

Website software development costs related to certain planning and training costs incurred in the development of website software are expensed as incurred, while application development stage costs are capitalized.

**Advertising and Marketing Expenses **

Advertising and marketing costs are expensed as incurred. Total advertising and marketing expenses for the years ended December 31, 2025 and 2024, were approximately $0.5 million and $0.8 million, respectively.

Income Taxes

We record income taxes under the asset and liability method. Deferred tax assets and liabilities reflect our estimation of the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for book and tax purposes. We determine deferred income taxes based on the differences in accounting methods and timing between financial statement and income tax reporting. Accordingly, we determine the deferred tax asset or liability for each temporary difference based on the enacted tax rates expected to be in effect when we realize the underlying items of income and expense. We consider all relevant factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience by jurisdiction, expectations of future taxable income and the carryforward periods available to us for tax reporting purposes, as well as assessing available tax planning strategies. We may establish a valuation allowance to reduce deferred tax assets to the amount we believe is more likely than not to be realized. Due to inherent complexities arising from the nature of our businesses, future changes in income tax law, tax sharing agreements or variances between our actual and anticipated operating results, we make certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates.

The accounting standard related to income taxes applies to all tax positions and defines the confidence level that a tax position must meet in order to be recognized in the financial statements. The accounting standard requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If a tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are to be recognized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits. This standard also provides guidance on the presentation of tax matters and the recognition of potential Internal Revenue Service interest and penalties. As of December 31, 2025 and 2024, the Company did not have an unrecognized tax liability.

The Company classifies penalty and interest expense related to income tax liabilities as an income tax expense. The Company did not incur any material interest and penalties for the years ended December 31, 2025 and 2024.

The Company files income tax returns in the U.S. and various state jurisdictions, and there are open statutes of limitation for taxing authorities to audit our tax returns from 2021 through the current period.

**Stock-Based Compensation **

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.

Calculating stock-based compensation expense using the Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the expected term of the stock-based awards, stock price volatility, and the pre-vesting option forfeiture rate. We consider many factors when estimating expected forfeitures, including the types of awards, employee classification and historical experience. Actual forfeitures may differ substantially from our current estimate. Under this pricing model, which incorporates ranges of assumptions for inputs, our assumptions are as follows:

Leases

In accordance with ASU 2016-02: Leases (Topic 842), we determine if an arrangement is a lease at inception. Operating leases are included in the right-of-use (ROU) assets, current operating lease liabilities and noncurrent operating lease liabilities in our consolidated balance sheet. Finance leases are included in property and equipment, current finance lease obligations and long-term finance lease obligations in our consolidated balance sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

As the discount rates in the Company’s lease are not implicit, the Company estimated the incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term.

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees.

We have operating and finance leases for corporate offices, other regional offices, and certain equipment. Our leases have remaining lease terms of 1 year to 5 years, some of which include multiple options to extend the leases for up to 5 years each.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

Recently Adopted Accounting Pronouncements

On January 1, 2024, we adopted ASU 2023-07, Segment Reporting (Topic 28); Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company adopted this update January 1, 2024 for annual reporting and January 1, 2025 for quarterly reporting. Management determined the extent of the reporting enhancements to be nominal.

Effective January 1,2024, we early adopted ASU 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60); Accounting for and Disclosure of Crypto Assets, which better reflects the economics of crypto assets, measuring those assets at fair value versus the current cost-less-impairment accounting model. An entity is required to measure crypto assets at fair value with changes recognized in net income each reporting period and report the crypto asset fair value separately from other intangible assets in the balance sheet. As of the effective adoption date, management determined the cumulative retained earnings impact, net of taxes, was $0.1 million.

Effective January 1, 2025, we adopted ASU 2023-09, Income Taxes (Topic 740); Improvements to Income Tax Disclosures, which enhance the transparency and decision usefulness of tax disclosures. The Company adopted this update January 1, 2025 for annual reporting. See Note 10 for the additional tax disclosures.

Recently Issued Accounting Pronouncements

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements, which will modify the disclosure or presentation requirements of a variety of Topics in the Codification. The updates align the requirements in the Codification with the SEC’s regulations. The effective date is anticipated to be June 30, 2027. At this time, management has not determined the impact on its financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), which improves disclosures of an entity’s expense by providing more detailed information about the types of expenses in commonly presented expense captions. The Company will be required to adopt this update January 1, 2027 for interim and annual reporting. At this time, management is determining the extent of enhanced disclosures on its financial statements.

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.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, to improve the navigability of the required interim disclosures and clarifying when that guidance is applicable and provides additional guidance on what disclosures should be provided in interim reporting periods. The Company will be required to adopt this update January 1, 2028 for annual reporting periods and January 1, 2029 for interim reporting periods. At this time, management is determining the extent of the impact to the disclosures on its financial statements.

Note 3 -Property and Equipment

The major categories of property and equipment are as follows as of December 31st:

Management performs an annual review of the Company’s fixed assets to ensure fully depreciated assets, which are no longer in use, are removed from the Company’s records. For the years ended December 31, 2025 and 2024, the Company wrote off approximately $0.1 million and $0.4 million, respectively, in fully depreciated fixed assets. The write-off had no impact on the Company’s Consolidated Statements of Income.

Total depreciation expense for the years ended December 31, 2025 and 2024 was approximately $0.3 million. Depreciation expense for assets recorded under finance leases for the years ended December 31, 2025 and 2024 was approximately $15,000.

Note 4 –Equity Investments

On August 9, 2018, the Company purchased aten percent membership interest in Progressive Beef, LLC (“Progressive Beef”) for approximately $1.0 million funded by a combination of cash and stock of the Company. Where Food Comes From is the primary certifier for Progressive Beef. As of December 31, 2025 and 2024, the Company received dividend income of approximately $0.1 million and $0.4 million, respectively, from Progressive Beef representing a distribution of their earnings. The income is reflected within the “other (expense) income” section of the Company’s Consolidated Statements of Income for the years ended December 31, 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 with a total value of $0.1 million. 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 year ended December 31, 2025. The Buyer and the Company each made customary representations and warranties in the Agreement.

The investment was accounted for as a financial instrument under ASC 321 and the Company had elected to apply the practical expedient to value the investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

On March 29, 2023, the Company made an equity investment of $0.2 million in a private placement of ShellFish Solutions, Inc. dba BlueTrace, Inc. (“BlueTrace”) Series Seed 2 Preferred Stock. The Company accounts for its investment in BlueTrace at cost, in accordance with Accounting Standard Update (“ASU”) 2016-01:*Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.*The Company completed a qualitative assessment and determined there were no impairment indicators as of December 31, 2025 and 2024.

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 Company’s digital assets are within the scope of ASU 2023-08 and the transition guidance requires a cumulative-effect adjustment as of the beginning of the current fiscal year for any difference between the carrying amount of the Company’s digital assets and fair value. As a result of the Company’s early adoption of ASU 2023-08, the Company recorded a $0.2 million increase to digital assets and a $0.1 million increase to retained earnings, net of tax effect, on the Consolidated Balance Sheets as of the beginning of the fiscal year ended December 31, 2024.

The following table presents the Company’s digital asset holdings as of December 31, 2025 and 2024:

The following table presents a roll-forward of total digital assets for the year ended December 31, 2025 and 2024, based on the fair value model under ASU 2023-08:

Note 6 –Intangible and Other Assets

The following table summarizes our intangible assets as of:

Management performs an annual review of the Company’s intangible assets to ensure fully depreciated assets, which are no longer in use, are removed from the Company’s records. For the years ended December 31, 2025 and 2024, the Company wrote off approximately $0 and $1.7 million, respectively, in fully depreciated intangible assets. The write-off had no impact on the Company’s Consolidated Statements of Income.

We reviewed ourlong-lived assets for indicators of impairmentin 2025 and 2024 and concluded in each year that no impairments exist.

Amortization expense for each of the years ended December 31, 2025 and 2024 was approximately $0.4 million.

As of December 31, 2025, future scheduled amortization of intangible assets is as follows (in thousands):

Note 7 –Goodwill

Annual Impairment Test of Goodwill

We performed a qualitative assessment of goodwill for our 2025 annual test and concluded that it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value and, therefore, a two-step impairment test was not necessary. The qualitative assessment compares current performance, expectations and other indicators against what was expected as part of the most recent Step 1 valuation.

Note 8 –Accrued Expenses and Other Current Liabilities

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

Note 9 -Notes Payable and Lease Obligations

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 upon maturity. As of December 31, 2024, the effective interest rate was 9.5%. The LOC was collateralized by all the business assets of 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.

Lease Obligations

We have operating and finance leases for corporate offices, other regional offices, and certain equipment. Our leases have remaining lease terms of 1 year to 5 years, some of which include multiple options to extend the leases for up to 5 years each.

The Company leases approximately 15,700 square feet of office space for its corporate headquarters. The original lease agreement had an initial term offive years plus two renewal periods. The Company renegotiatedthe lease in November 2025 for an additional seventeen (17) month period, with the lease terminating December 31, 2027. The amendment of the lease agreement resulted in remeasuring the lease payments under ASC 842, “Accounting for Lease.” The present value of the remaining lease payments was less than the previously recorded, resulting in approximately $1.3 million reduction in the Right-of-use assets and Operating lease obligation on the Consolidated Balance Sheets.

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

Included in the table above, is approximately $0.4 million for the years ended December 31, 2025 and 2024, of operating lease cost for our corporate headquarters. This space was being leased from The Move, LLC. Our CEO and President, each a related party to WFCF, had a 24.3% jointly-held ownership interest in The Move, LLC. In December 2025, The Move, LLC closed on the sale of 100% of its interest in the office space to an unrelated party.

Rent and lease expense for each of the years ended December 31, 2025 and 2024 was approximately $0.6 million.

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

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

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

Note 10 - Income Taxes

The provision for income taxes consists of the following (in thousands):

Income taxes paid (net of refunds) by jurisdiction:

Income taxes paid in the following jurisdictions exceeded five percent (5%) of total income taxes paid (net of refunds):

The reconciliation of income taxes calculated at the statutory rates to our effective tax rate is as follows (in thousands):

The income tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are as follows (in thousands):

Note 11 –Stock Buyback Plan

On September 30, 2019, our Board of Directors approved a new plan to buyback up to 2.5 million additional shares of our common stock from the open market (“Stock Buyback Plan”). The schedule below presents the buyback activity for the years ended December 31, 2024 and 2025.

As of December 31, 2025, the Company has approximately 1.1 million shares eligible for repurchase under its Stock buyback Plan. The repurchased shares are recorded as part of treasury stock and are accounted for under the cost method.

Our Stock Buyback Plan has been and will be used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. In the future, we may consider additional share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, and planned investment and financing needs.

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 retired 1,237,700 shares of outstanding common stock held as treasury shares on the Consolidated Balance Sheet. In accordance with ASC 505-30, the Company accounted for the retirement of the repurchased shares by reducing Common Stock by the shares’ aggregate par value and reducing Additional paid-in capital (“APIC”) associated with the originally issued shares of approximately $13.8 million. Because the repurchase cost exceeded the sum of par value and related APIC, the remaining excess of $2.4 million was recorded as a reduction to Retained Earnings.

**Note 12 –Stock-Based Compensation **

In addition to cash compensation, the Company may compensate certain service providers, including employees, directors, consultants, and other advisors, with equity-based compensation in the form of stock options and 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 income.

The amount of stock-based compensation expense is as follows (in thousands):

As of December 31, 2024, all stock option awards have vested and all expense has been recognized.

Equity Incentive Plans

Our 2016 Equity Incentive Plan (the “2016 Plan”) provides for the issuance of stock-based awards to employees, officers, directors and consultants. The Plan permits 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.

Our 2016 Plan was ratified by our shareholders in May 2016 and provides for the issuance of a maximum of 5.0 million shares of our common stock, of which 4.9 million shares were still available for issuance as of December 31, 2025.

In April 2025, our shareholders ratified our 2026 Equity Incentive Plan (the “2026 Plan”), which provides for the issuance of a maximum of 500,000 shares of our common stock. The 2026 Plan is effective beginning January 1, 2026.

Stock Option Activity

The Company generally grants stock options to directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the stock option grants are set forth in the award agreements. A stock option grant represents an option to purchase a defined number of shares of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over one to three years.

Stock option activity during 2025 and 2024 is summarized as follows:

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of our common stock on December 31, 2025 and the exercise price for in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on December 31, 2025.

During the year ended December 31, 2025 and 2024, no options were forfeited.

Stock Activity

The Company grants shares of stock to directors, eligible employees and officers as a part of its equity incentive plan. Any restrictions and vesting periods for the awards are set forth in the award agreements. Each share of stock represents one share of the Company’s common stock. Shares of stock are valued at the closing price of the Company’s common stock on the grant date and are recognized as selling, general and administrative expense over the vesting period of the award.

During 2025, the Company awarded 2,000 shares of the Company’s common stock at a fair market value price of $11.69 to independent members of the board of directors, with immediate vesting.

During 2024, the Company awarded 2,000 shares of the Company’s common stock at a fair market value price of $11.27 to independent members of the board of directors, with immediate vesting.

In December 2025, our Board of Directors, desiring to reinforce aligned interests, promote momentum with its employees, and encourage retention with a uniquely talented workforce, authorized a maximum grant of 10,000 shares, in aggregate, of the Company’s common stock to eligible employees. The final number of shares to be granted is contingent upon individual employee acceptance of the stock grant.

**Note 13 -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, restricted stock awards and 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 plus unrecognized stock-based compensation obtained thereby were used by the Company 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:

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 14 -Related Party Transactions **

The Company leases its corporate headquarters from a company in which our CEO and President had a 24.3% jointly-held ownership interest (Note 15). Under the related party arrangement, approximately $0.6 million, was paid in rent and CAM for our corporate headquarters was included in the consolidated statements of income for each of the years ended December 31, 2025 and 2024. In December 2025, The Move, LLC closed on the sale of 100% of its ownership interest in the office space to an unrelated party.

The Company periodically does business with certain entities its officers and directors are affiliated with. Such transactions are done on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances.

Note 15 –Commitments and Contingencies

Operating Leases & Lease Incentive Obligation

The Company leases approximately 15,700 square feet of office space for its corporate headquarters. This space was being leased from The Move, LLC in which our CEO and President, each a related party to the Company, had a 24.3% jointly-held ownership interest. The lease agreement had an initial term offive years plus two renewal periods. The Company renegotiated the lease in November 2025 for an additional seventeen (17) month period, with the lease terminating December 31, 2027. Total rental payments are approximately $48,746 per month as of December 31, 2025. The rental payments include common area charges and are subject to annual increases over the term of the lease. In December 2025, The Move, LLC closed on the sale of 100% of its ownership interest in the office space to an unrelated party.

The Company has recorded leasehold improvements of approximately $0.8 million, which included approximately $0.4 million in lease incentives. Leasehold improvements are included in property and equipment on the consolidated balance sheets. Lease incentives have been included in calculating the lease liability recorded on the balance sheet.

In September 2017, the Company entered into a new lease agreement for our Urbandale, Iowa office space. The lease was for a period oftwo years and expired on August 31, 2019. This lease was amended for a five (5) year renewal period, with the current extension terminating on August 31, 2030. Rental payments are approximately $3,721 per month as of December 31, 2025, which includes common area charges, and are not subject to annual increases over the term of the lease.

In December 2018, the Company entered into a lease agreement in San Ramon, California for SureHarvest office space. The lease was for a period ofsixty-six months and expired on March 1, 2024. In February 2024, the Company entered into a new lease agreement in Danville, CA for a period of thirty-one (31) months, expiring September 30, 2026, withone option to extend the lease for another twenty-four (24) months. Rental payments are approximately $2,904 per month as of December 31, 2025, which includes common area charges, and are subject to annual increases over the term of the lease.

In December 2021, the Company entered into a lease agreement for the Medina, North Dakota office space. The lease is for sixty-one (61) months and expires on December 31, 2026. Rental payments are approximately $1,000 per month as of December 31, 2025, which includes common area charges, and are not subject to annual increases over the term of the lease.

See Note 9 of our Consolidated Financial Statements for a detailed description of maturities of lease liabilities related to our leases.

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.

Employee Benefit Plan

The Company has established a 401(k) plan for the benefit of our employees. The plan covers substantially all of our employees who have attained age 21. We may make a discretionary matching contribution in an amount that is determined by our Board of Directors. If a matching contribution is made, the amount cannot exceed the elective deferral contributions. For each of the years ended December 31, 2025 and 2024, we made aggregate matching contributions of approximately $0.3 million.

Note 16 –Supplemental Cash Flow Information

Note 17 -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 haveone 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 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 (in thousands):

Note 18 –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.