Where Food Comes From, Inc.

Previous wording

Through SureHarvest Services LLC (“SureHarvest”) and Postelsia Holdings, Ltd. (“Postelsia”), we primarily provide a wide range of professional services that support our verification activites and generate incremental revenue specific to the food and agricultural industry.

Current wording

Through SureHarvest Services LLC (“SureHarvest”) and Postelsia Holdings, Ltd. (“Postelsia”), we primarily provide a wide range of professional services that support our verification activities and generate incremental revenue specific to the food and agricultural industry.

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, 2025, we had 101 total employees, of which 90 were full-time employees. Approximately 85% 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, 2025, we had 104 total employees, of which 90 were full-time employees. Approximately 84% 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. 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.

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. 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 will continue to contract will be directly impacted by drought and pasture conditions.

Previous wording

At March 31, 2025, we had cash and cash equivalents of approximately $2.2 million compared to approximately $2.0 million at December 31, 2024. Our working capital at March 31, 2025 and December 31, 2024 was approximately $2.2 million and $2.4 million, respectively.

Current wording

At June 30, 2025, we had cash and cash equivalents of approximately $3.2 million compared to approximately $2.0 million at December 31, 2024. Our working capital at June 30, 2025 and December 31, 2024 was approximately $2.6 million and $2.4 million, respectively.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2025 was approximately $0.6 million compared to $0.7 million during the same period in 2024. 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, fair market value gains and losses on digital 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, 2025 decreased compared to the same period in 2024 primarily due to a slight decrease in operating performance.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was approximately $1.8 million compared to $1.9 million during the same period in 2024. 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, fair market value gains and losses on digital 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, 2025 decreased compared to the same period in 2024 primarily due to a slight decrease in operating performance.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 was approximately $29,000 compared to $24,000 in the 2024 period. Net cash used in the period ending March 31, 2025 and 2024 was for purchases of equipment and software development costs.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 was approximately $63,000 compared to $91,000 in the 2024 period. Net cash used in the period ending June 30, 2025 and 2024 was for purchases of equipment and software development costs.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2025 and 2024 was approximately $0.3 million and $1.4 million, respectively. Cash used for the period ending March 31, 2025, was primarily due to the repurchase of common shares under the Stock Buyback Plan. 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.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 and 2024 was approximately $0.6 million and $1.8 million, respectively. Cash used for the period ending June 30, 2025, was primarily due to the repurchase of common shares under the Stock Buyback Plan. Cash used for the period ending June 30, 2024, was primarily due to the private purchase of stock and the repurchase of common shares under the Stock Buyback Plan.

Previous wording

The Company had a revolving line of credit (“LOC”) agreement which matured April 12, 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 March 31, 2025 and December 31, 2024, the effective interest rate was 9.0%. The LOC is collateralized by all the business assets of Where Food Comes From Organic, Inc. (“WFCFO”). As of March 31, 2025 and December 31, 2024, there were no amounts outstanding under this LOC.

Current wording

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 is 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 were no amounts outstanding under this LOC. The Company decided not to renew the LOC at April 12, 2025.

Previous wording

Three months ended March 31, 2025 compared to the same period in fiscal year 2024

Current wording

Three and six months ended June 30, 2025 compared to the same period in fiscal year 2024

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 programare also included in our verification and certification revenuesas 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, 2025 decreased $0.3 million compared with the same period in 2024. While we continue to experience new customer growth and bundling opportunities, these increases have been negatively impacted by revenue tied directly to price per head of cattle and delayed timing of poultry audits in which facilities have been impacted by Avian Influenza. We believe we are still at a low point of a contraction phase within the cattle cycle. How long we continue to contract will be directly impacted by drought and pasture conditions.

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 months ended June 30, 2025 increased marginally compared with the same period in 2024, while the six month period decreased $0.2 million compared to the same period in 2024. While we continue to experience new customer growth and bundling opportunities, these increases have been negatively impacted by revenue tied directly to price per head of cattle and delayed timing of poultry audits in which facilities have been impacted by Avian Influenza. We believe we are still at a low point of a contraction phase within the cattle cycle. How long we will continue to contract will be directly impacted by drought and pasture conditions.

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, 2025 slightly decreased $31,000, compared to the same period in 2024.

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, 2025 increased 17.7% and 7.3%, respectively, compared to the same periods in 2024.

Previous wording

Professional services revenue 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. Our profesional services revenue stream is predominantly project based and not recurring in nature. Professional services revenue for the three months ended March 31, 2025 decreased less than $26,000, compared to the same period in 2024.

Current wording

Professional services revenue 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. Our professional services revenue stream is predominantly project based and not recurring in nature. Professional services revenue for the three and six months ended June 30, 2025 decreased $58,000 and $84,000, respectively, compared to the same periods in 2024.

Previous wording

Costs of verification and certification services for the three months ended March 31, 2025 and 2024 were approximately $2.4 million and $2.5 million, respectively or 57.3% of revenue compared to 56.7% of revenue in the comparable 2024 period. Our costs of verification and certification services are generally impacted by various costs such as salaries and benefits, insurance and taxes. The percentage increase is primarily due to increases in compensation related costs due to a tight labor market.

Current wording

Costs of verification and certification services for the three and six months ended June 30, 2025 were approximately $3.3 million and $5.7 million, respectively, compared to $3.0 million and $5.5 million, respectively, for the same periods in 2024. Gross margin for the three months ended June 30, 2025 and 2024 was 38.4% and 42.3%, respectively, while the gross margin for the six months ended June 30, 2025 and 2024 was 40.3% and 42.8%, respectively. Our costs of verification and certification services are generally impacted by various costs such as salaries and benefits, insurance and taxes. The percentage increase is primarily due to increases in compensation related costs due to a tight labor market.

Previous wording

Costs of products for the three months ended March 31, 2025 and 2024 were approximately $0.4 million, or 61.0% of revenue compared to 59.2% of revenue in the comparable 2024 period. The percentage increase is primarily due to inflationary increases in the costs of products shipped.

Current wording

Costs of products for the three and six months ended June 30, 2025 were approximately $0.6 million and $1.0 million, respectively, compared to $0.5 million and $0.9 million, respectively, for the same periods in 2024. The increase is primarily due to inflationary increases in the costs of products shipped.

Previous wording

Costs of our professional services revenue for the three months ended March 31, 2025 and 2024 was approximately $0.3 million.

Current wording

Costs of our professional services revenue for the three and six months ended June 30, 2025 and 2024 were approximately $0.2 million and $0.5 million, respectively.

Previous wording

Other operating expenses for the three months ended March 31, 2025 and 2024 were approximately $1.9 million. Our most significant operating expense includes salaries and benefits. The increase in the 2025 period is due to a tight labor market, offset by savings in marketing and tradeshow costs. Some of the savings are due to timing, while some are due to a very disciplined approach in our marketing process. Depreciation and amortization expense for the three months ended March 31, 2025 and 2024 were approximately $0.2 million.

Current wording

Other operating expenses for the three and six months ended June 30, 2025 were approximately $1.8 million and $3.6 million, respectively, compared to $1.9 million and $3.8 million, respectively, for the same periods in 2024. Our most significant operating expense includes salaries and benefits. The increase in the 2025 period is due to a tight labor market, offset by savings in marketing and tradeshow costs. Some of the savings are due to timing, while some are due to a very disciplined approach in our marketing process. Depreciation and amortization expense for the three and six months ended June 30, 2025 and 2024 were approximately $0.2 million and $0.3 million, respectively.

Previous wording

For the three months ended March 31, 2025 and 2024, the Company did not receive any dividend income from Progressive Beef.

Current wording

For the three and six months ended June 30, 2025 and 2024, the Company received $50,000 and $100,000, respectively, of dividend income from Progressive Beef.

Previous wording

The Company measures the digital assets at fair value with changes recognized in the Consolidated Statements of Income for each reporting period. For the quarter ended March 31, 2025, the Company recorded an unrealized loss of approximately $76,000.

Current wording

The Company measures the digital assets at fair value with changes recognized in the Consolidated Statements of Income for each reporting period. For the three and six months ended June 30, 2025, the Company recorded an unrealized gain of approximately $0.2 million and $0.1 million, respectively.

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, 2025, we recorded income tax expense of approximately $38,000 compared to income tax expense of $87,000 for the same period in 2024.

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, 2025, we recorded income tax expense of approximately $0.2 million for both periods, compared to income tax expense of $0.2 million and $0.3 million, respectively for the same period in 2024.

Previous wording

As a result of the foregoing, net income attributable to WFCF shareholders for the three months ended March 31, 2025 was approximately $31,000 and $0.01 per basic and diluted common share, respectively, compared to net income of approximately $0.2 million and $0.03 per basic and diluted common share for the same period in 2024.

Current wording

As a result of the foregoing, net income attributable to WFCF shareholders for the three and six months ended June 30, 2025 was approximately $0.6 million and $0.11 per basic and diluted common share, for both periods, compared to net income of approximately $0.5 million and $0.7 million and $0.09 and $0.12 per basic and diluted common share for the same periods in 2024.