# EDGAR Filing Document

**Accession Number:** 0001360565
**File Stem:** 0001493152-23-006080
**Filing Date:** 2023-2
**Character Count:** 34027
**Document Hash:** c69bf85e4c42f8a013f5cc26549dca63
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-23-006080.hdr.sgml**: 20230227

**ACCESSION NUMBER**: 0001493152-23-006080

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230223

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230227

**DATE AS OF CHANGE**: 20230227

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Where Food Comes From, Inc.
- **CENTRAL INDEX KEY:** 0001360565
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **IRS NUMBER:** 431802805
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40314
- **FILM NUMBER:** 23671615

**BUSINESS ADDRESS:**
- **STREET 1:** 202 6TH STREET
- **STREET 2:** SUITE 400
- **CITY:** CASTLE ROCK
- **STATE:** CO
- **ZIP:** 80104
- **BUSINESS PHONE:** (303) 895-3002

**MAIL ADDRESS:**
- **STREET 1:** 202 6TH STREET
- **STREET 2:** SUITE 400
- **CITY:** CASTLE ROCK
- **STATE:** CO
- **ZIP:** 80104

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Integrated Management Information, Inc.
- **DATE OF NAME CHANGE:** 20060425

?xml version="1.0" encoding="utf-8"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 8-K**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

Date of Report (Date of earliest event reported): **February 23, 2023** 

**WHERE FOOD COMES FROM, INC.**

(Exact Name of Registrant as Specified in its Charter)

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| | | |
|:---|:---|:---|
| **Colorado** | **001-40314** | **43-1802805** |
| (State or Other Jurisdiction<br> of Incorporation) | (Commission<br> File Number) | (I.R.S. Employer <br> Identification No.) |

---

---

| | |
|:---|:---|
| **202 6<sup>th</sup> Street, Suite 400** |  |
| **Castle Rock, Colorado** | **80104** |
| (Address of Principal Executive Offices) | (Zip Code) |

---

**(303) 895-3002**

(Registrant's Telephone Number, Including Area Code)

**Not applicable**

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $0.001 par value | WFCF | The NASDAQ Stock Market LLC |

---

---

| | |
|:---|:---|
| **Item 2.02** | **Results of Operations and Financial Condition** |

---

Reference is made to the Where Food Comes From, Inc. (the "Company") press release on February 23, 2023 and conference call transcript, attached hereto as Exhibits 99.1 and 99.2, respectively, and incorporated by reference herein (including, without limitation, the information set forth in the cautionary statement contained in the press release and conference call transcript), relating to the Company's financial results for the fourth quarter and year ended December 31, 2022.

---

| | |
|:---|:---|
| **Item 9.01** | **Financial Statements and Exhibits** |

---

&nbsp;&nbsp;&nbsp;&nbsp;(d) Exhibits

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| | |
|:---|:---|
| Exhibit<br> No. | Description |
| 99.1 | [Press Release issued and dated February 23, 2023](ex99-1.htm) |
| 99.2 | [Transcript for February 23, 2023 conference call](ex99-2.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

**<u>SIGNATURE</u>**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | **WHERE FOOD COMES FROM, INC.**<br> *(Registrant)* | **WHERE FOOD COMES FROM, INC.**<br> *(Registrant)* |
|  | By: | */s/ Dannette Henning* |
| Date: February 27, 2023 |  | Dannette Henning |
|  |  | Chief Financial Officer |

---

## Exhibit 99.1

**Exhibit 99.1**

Where Food Comes From, Inc. Reports 2022 Fourth Quarter and Full Year Financial Results

**Full Year Highlights – 2022 vs. 2021**

● **Revenue increased 13% to $24.8 million from $21.9 million** 

● **Net income of $2.0 million vs. $3.0 million last year when Company booked $1.0 million in PPP loan forgiveness** 

● **Diluted EPS of $0.33 vs. $0.48** 

● **Adjusted EBITDA of $3.8 million vs. $3.7 million** 

● **Cash generated from operations declined to $2.7 million vs. $3.0 million** 

● **Cash & cash equivalents at $4.4 million vs. $5.4 million, reflecting accelerated stock buybacks** 

● **Company buys back nearly $3.5 million of its stock in 2022, or 307,884 shares at average price of $11.23 per share** 

**Fourth Quarter Highlights – 2022 vs. 2021**

● **Revenue increased to $6.1 million from $5.8 million** 

● **Net income declined to $490,000 from $742,000** 

● **Diluted EPS of $0.08 vs. $0.12** 

● **Adjusted EBITDA of $1.0 million vs. $1.3 million** 

● **Company buys back approximately $1.2 million of its stock in Q4, or 105,101 shares at average price of $11.88 per share** 

CASTLE ROCK, Colo., Feb. 23, 2023 (GLOBE NEWSWIRE) — Where Food Comes From, Inc. (WFCF) (Nasdaq: WFCF), the most trusted resource for independent, third-party verification of food production practices in North America, today announced financial results for its fourth quarter and full year ended December 31, 2022.

"We produced solid results in 2022 considering various headwinds involving inflationary pressures and adverse weather conditions that impacted our producer customers," said John Saunders, Chairman and CEO. "Total revenue was up 13% year over year as we delivered growth in all three revenue segments. Net income for the year, excluding the impact of PPP loan forgiveness in 2021, was also slightly higher despite a sharp increase in labor costs due to the tight labor market and resulting wage inflation. Based on our continued profitability and predictable cash flows, we accelerated our share buyback program in 2022 and repurchased nearly $3.5 million of our stock during the year at an average price of $11.88 per share. Over the past two fiscal years we have returned approximately $5.5 million in value to stockholders through share buybacks and a special dividend.

"We are confident in our ability to continue delivering positive results for our stockholders over the long term," Saunders added. "We have the industry's most complete portfolio of solutions and continue to benefit from legacy trends around food supply chain transparency and emerging trends such as ESG, animal disease traceability and aquaculture verification."

**Full Year Results – 2022 vs. 2021**

Total revenue in 2022 increased 13% to $24.8 million from $21.9 million in the prior year. The increase included growth in all three revenue segments.

Revenue mix included:

● Verification and certification services, up 10% to $17.6 million from $16.1 million.

● Product revenue, up 14% to $4.4 million from $3.8 million.

● Software and related consulting revenue, up 40% year over year to $2.9 million from $2.0 million, due primarily to execution of a large project with a Japanese government entity in the first quarter of 2022.

Gross profit in 2022 increased 8% to $10.5 million from $9.7 million.

Selling, general and administrative expense increased 5% year over year to $7.8 million from $7.4 million.

Operating income increased 15% year over year to $2.7 million from $2.3 million.

Net income in 2022 was $2.0 million, or $0.33 per diluted share, compared to net income of $3.0 million, or $0.48 per diluted share, in the prior year. In 2021, excluding PPP loan forgiveness of $1.0 million, net income would have been $1.9 million, or $0.31 per diluted share.

Adjusted EBITDA increased to $3.8 million from $3.7 million last year.

Cash generated from operations declined to $2.7 million from $3.0 million year over year.

The year-end cash and cash equivalents balance declined to $4.4 million from $5.4 million at 2021 year-end due primarily to the Company's accelerated share repurchase program. For the full year, the Company bought back nearly $3.5 million of its shares, or 307,884 shares at average price of $11.23 per share. By comparison, the Company bought back $1.1 million in stock in 2021.

**Fourth Quarter Results – 2022 vs. 2021**

Revenue in the fourth quarter ended December 31, 2022, increased 5% year over year to $6.1 million from $5.8 million.

Revenue mix included:

● Verification and certification services, up 7% to $4.7 million from $4.4 million.

● Product revenue, up 17% year over year to $0.9 million from $0.8 million.

● Software and related consulting revenue, down 22% to $0.5 million from $0.6 million.

Gross profit in the fourth quarter declined 6% year over year to $2.8 million from $2.9 million due to higher labor costs related to a tightening labor market and wage inflation.

Selling, general and administrative expense was flat at $2.1 million.

Operating income declined 19% to $0.6 million from $0.8 million in the same quarter last year.

Net income decreased 34% year over year to $490,000, or $0.08 per diluted share, from $742,000, or $0.12 per diluted share.

Adjusted EBITDA in the fourth quarter was down 21% to $1.0 million from $1.3 million.

The Company bought back approximately $1.2 million of its common stock in the fourth quarter, or 105,101 shares at an average price of $11.88 per share.

The Company will conduct a conference call today at 10:00 a.m. Mountain Time.

**Call-in numbers for the conference call:**

Domestic Toll Free: 1-877-407-8289

International: 1-201-689-8341

Conference Code: 13736422

**Phone replay:**

A telephone replay of the conference call will be available through March 23, 2023, as follows:

Domestic Toll Free: 1-877-660-6853

International: 1-201-612-7415

Conference Code: 13736422

**About Where Food Comes From, Inc.**

Where Food Comes From, Inc. is America's trusted resource for third party verification of food production practices. Through proprietary technology and patented business processes, the Company estimates that it supports more than 17,500 farmers, ranchers, vineyards, wineries, processors, retailers, distributors, trade associations, consumer brands and restaurants with a wide variety of value-added services. Through its IMI Global, Validus Verification Services, SureHarvest, WFCF Organic (previously known as International Certification Services and A Bee Organic), and Postelsia units, Where Food Comes From solutions are used to verify food claims, optimize production practices and enable food supply chains with analytics and data driven insights. In addition, the Company's Where Food Comes From® retail and restaurant labeling program uses web-based customer education tools to connect consumers to the sources of the food they purchase, increasing meaningful consumer engagement for our clients.

**\*Note on non-GAAP Financial Measures** 

This press release and the accompanying tables include a discussion of EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with generally accepted accounting principles ("GAAP"). The term "EBITDA" refers to a financial measure that we define as earnings (net income or loss) plus or minus net interest plus taxes, depreciation and amortization. Adjusted EBITDA excludes from EBITDA stock-based compensation and, when appropriate, other items that management does not utilize in assessing WFCF's operating performance (as further described in the attached financial schedules). None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income as an indicator of operating performance or any other GAAP measure. We have reconciled Adjusted EBITDA to GAAP net income in the Consolidated Statements of Income table at the end of this release. We intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting.

**CAUTIONARY STATEMENT**

This news release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations, estimates and projections that are subject to risk. Forward-looking statements are inherently uncertain, and actual events could differ materially from the Company's predictions. Important factors that could cause actual events to vary from predictions include those discussed in our SEC filings. Specifically, statements in this news release about industry leadership, diversity of services mix, potential for consumer trends to benefit the Company, ability to continue returning value and delivering positive results for stockholders, and demand for, and impact and efficacy of, the Company's products and services on the marketplace are forward-looking statements that are subject to a variety of factors, including availability of capital, personnel and other resources; competition; governmental regulation of the agricultural industry; the market for beef and other commodities; and other factors. Financial results for 2022 and the Company's pace of stock buybacks are not necessarily indicative of future results. Readers should not place undue reliance on these forward-looking statements. The Company assumes no obligation to update its forward-looking statements to reflect new information or developments. For a more extensive discussion of the Company's business, please refer to the Company's SEC filings at <u>www.sec.gov</u>.

Company Contacts:

John Saunders

Chief Executive Officer

303-895-3002

Jay Pfeiffer

Director, Investor Relations

303-880-9000

<u>jpfeiffer@wherefoodcomesfrom.com</u>

**Where Food Comes From, Inc.**

**Statements of Income (Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| (Amounts in thousands, except per share amounts) |  |  |  |  |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Verification and certification service revenue | $4693 | $4399 | $17610 | $16058 |
| &nbsp;&nbsp;&nbsp;Product sales | 891 | 759 | 4364 | 3830 |
| &nbsp;&nbsp;&nbsp;Software and related consulting revenue | 509 | 648 | 2871 | 2044 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenues | 6093 | 5806 | 24845 | 21932 |
| Costs of revenues: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Costs of verification and certification services | 2487 | 2039 | 9748 | 8402 |
| &nbsp;&nbsp;&nbsp;Costs of products | 448 | 472 | 2333 | 2441 |
| &nbsp;&nbsp;&nbsp;Costs of software and related consulting | 397 | 357 | 2296 | 1352 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total costs of revenues | 3332 | 2868 | 14377 | 12195 |
| &nbsp;&nbsp;&nbsp;Gross profit | 2761 | 2938 | 10468 | 9737 |
| Selling, general and administrative expenses | 2119 | 2144 | 7816 | 7434 |
| Income from operations | 642 | 794 | 2652 | 2303 |
| Other income/(expense): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Dividend income from Progressive Beef | 100 | 110 | 250 | 200 |
| &nbsp;&nbsp;&nbsp;Gain on disposal of assets | 12 | 86 | 12 | 95 |
| &nbsp;&nbsp;&nbsp;Loan forgiveness from Paycheck Protection Program |  |  |  | 1037 |
| &nbsp;&nbsp;&nbsp;Loss on foreign currency exchange | (3) | (2) | (38) | (11) |
| &nbsp;&nbsp;&nbsp;Impairment of digital assets | (20) |  | (62) |  |
| &nbsp;&nbsp;&nbsp;Other income, net | 3 | 1 | 5 | 2 |
| &nbsp;&nbsp;&nbsp;Interest expense | (1) | (1) | (3) | (6) |
| Income before income taxes | 733 | 988 | 2816 | 3620 |
| Income tax expense | 243 | 246 | 822 | 659 |
| &nbsp;&nbsp;&nbsp;Net income | $490 | $742 | $1994 | $2961 |
| Per share - net income: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $0.08 | $0.13 | $0.34 | $0.49 |
| &nbsp;&nbsp;&nbsp;Diluted | $0.08 | $0.12 | $0.33 | $0.48 |
| Weighted average number of common shares outstanding: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | 5814 | 6083 | 5955 | 6098 |
| &nbsp;&nbsp;&nbsp;Diluted | 5889 | 6167 | 6035 | 6185 |

---

**Where Food Comes From, Inc.**

**Calculation of Adjusted EBITDA\***

**(Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended December 31,** | **Three months ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| (Amounts in thousands) |  |  |  |  |
| Net income | $490 | $742 | $1994 | $2961 |
| Adjustments to EBITDA: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | 1 | 1 | 3 | 6 |
| &nbsp;&nbsp;&nbsp;Income tax expense | 243 | 246 | 822 | 659 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 182 | 198 | 765 | 799 |
| EBITDA\* | 916 | 1187 | 3584 | 4425 |
| Adjustments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Loan forgiveness |  |  |  | (1037) |
| &nbsp;&nbsp;&nbsp;Impairment | 20 |  | 62 |  |
| &nbsp;&nbsp;&nbsp;Stock-based compensation | 52 | 69 | 154 | 291 |
| &nbsp;&nbsp;&nbsp;Cost of acquisitions | - | - | - | - |
| ADJUSTED EBITDA\* | $988 | $1256 | $3800 | $3679 |

---

\*Use of Non-GAAP Financial Measures: Non-GAAP results are presented only as a supplement to the financial statements and for use within management's discussion and analysis based on U.S. generally accepted accounting principles (GAAP). The non-GAAP financial information is provided to enhance the reader's understanding of the Company's financial performance, but non-GAAP measures should not be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein.

All of the items included in the reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation, etc.) or (ii) items that management does not consider to be useful in assessing the Company's ongoing operating performance (e.g., M&A costs, income taxes, gain on sale of investments, loss on disposal of assets, etc.). In the case of the non-cash items, management believes that investors can better assess the Company's operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company's ability to generate free cash flow or invest in its business.

We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.

Because not all companies use identical calculations, the Company's presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company's performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures.

**Where Food Comes From, Inc.**

**Balance Sheets (Audited)**

---

| | | |
|:---|:---|:---|
|  | **December 31,**<br>**2022** | **December 31,**<br>**2021** |
| (Amounts in thousands, except per share amounts) |  |  |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $4368 | $5414 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of allowance | 2172 | 2178 |
| &nbsp;&nbsp;&nbsp;Inventory | 888 | 767 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 463 | 325 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 7891 | 8684 |
| Property and equipment, net | 998 | 1295 |
| Right-of-use assets, net | 2607 | 2823 |
| Investment in Progressive Beef | 991 | 991 |
| Intangible and other assets, net | 2340 | 2581 |
| Goodwill, net | 2946 | 2946 |
| Deferred tax assets, net | 523 | 464 |
| Total assets | $18296 | $19784 |
| **Liabilities and Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $640 | $447 |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 769 | 710 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 1278 | 1513 |
| &nbsp;&nbsp;&nbsp;Current portion of finance lease obligations | 9 | 13 |
| &nbsp;&nbsp;&nbsp;Current portion of operating lease obligations | 341 | 313 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 3037 | 2996 |
| Finance lease obligations, net of current portion | 37 | 19 |
| Operating lease obligation, net of current portion | 2745 | 3020 |
| Total liabilities | 5819 | 6035 |
| Commitments and contingencies |  |  |
| Equity: |  |  |
| &nbsp;&nbsp;&nbsp;Preferred stock, $0.001 par value; 5,000 shares authorized; none issued or outstanding |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.001 par value; 95,000 shares authorized; 6,501 (2022) and 6,489 (2021) shares issued, and 5,775 (2022) and 6,071 (2021) shares outstanding | 6 | 6 |
| &nbsp;&nbsp;&nbsp;Additional paid-in-capital | 12145 | 11955 |
| &nbsp;&nbsp;&nbsp;Treasury stock of 727 (2022) and 419 (2021) shares | (7263) | (3807) |
| &nbsp;&nbsp;&nbsp;Retained earnings | 7589 | 5595 |
| Total equity | 12477 | 13749 |
| Total liabilities and stockholders' equity | $18296 | $19784 |

---

## Exhibit 99.2

**Exhibit 99.2**

**Where Food Comes From, Inc.**

**2022 Fourth Quarter Conference Call**

Call date: Thursday February 23, 2023

Call time: 10:00 a.m. Mountain Time

**Jay Pfeiffer – Investor Relations**

Good morning and welcome to the Where Food Comes From 2022 fourth quarter and year-end earnings call.

Joining me on the call today are CEO John Saunders, President Leann Saunders, and Chief Financial Officer Dannette Henning.

During this call we'll make forward-looking statements based on current expectations, estimates and projections that are subject to risk. Statements about current and future financial performance, growth strategy, customers, business opportunities, market acceptance of our products and services, and potential acquisitions are forward looking statements. Listeners should not place undue reliance on these statements as there are many factors that could cause actual results to differ materially from our forward-looking statements. We encourage you to review our publicly filed documents as well as our news releases and website for more information. Today we'll also discuss Adjusted EBITDA, a non-GAAP financial measure provided as a complement to GAAP results. Please refer to today's earnings release for important disclosures regarding non-GAAP measures.

I'll now turn the call over to John Saunders.

**John Saunders**

Good morning and thanks for joining the call today.

This morning we announced results for our fourth quarter and full year ended December 31, 2022, and once again we are happy to report we extended our track record of profitable growth.

Beginning with our full year, revenue increased 13% year over year to $24.8 million from $21.9 million. The increase included growth in all three revenue segments:

● Verification and certification services grew by 10% to $17.6 million from $16.1 million last year.

● Product revenue increased 14% year over year to $4.4 million from $3.8 million.

● And software and related consulting revenue was up 40% on the year – to $2.9 million from $2.0 million. The big increase was primarily due to a large project we completed for the Japanese government in the first quarter of the year.

Selling, general and administrative expense increased 5% year over year to $7.8 million from $7.4 million. This increase included higher personnel costs in what continues to be a very competitive labor market.

Net income in 2022 decreased to $2.0 million, or $0.33 per diluted share, from net income of $3.0 million, or $0.48 per diluted share, a year ago. Keep in mind, however, that a year ago we booked approximately $1.0 million in PPP loan forgiveness.

Adjusted EBITDA in 2022 increased to $3.8 million from $3.7 million a year ago and we generated $2.7 million in cash from operations in 2022 compared to $3.0 million in the prior year.

We closed the year with cash and cash equivalents of $4.4 million compared to $5.4 million at the same time last year. That decline was due to our continued investment in our own shares, which I will address in more detail in just a moment.

Turning to fourth quarter results:

Total revenue increased 5% year over year to $6.1 million from $5.8 million.

● Verification and certification services was up 7% to $4.7 million from $4.4 million.

● Product revenue was up 17% to $0.9 million from $0.8 million.

● Software and related consulting revenue was down 22% year over year to $0.5 million from $0.6 million. Again, I'll remind you that this revenue category will continue to be choppy as our product offerings and services engagements continue to evolve.

Selling, general and administrative expense was flat year over year to $2.1 million.

Net income in the fourth quarter decreased 34% year over year to $0.5 million, or $0.08 per diluted share, from $0.7 million, or $0.12 per diluted share, in the same quarter last year.

Adjusted EBITDA in the fourth quarter declined 21% year over year to $1.0 million from $1.3 million.

On January 1, 2023, the USDA announced the adoption of the latest phase of ADT or animal disease traceability, which now requires the replacement of visual and/or metal clip tags with radiofrequency identification tags. Accordingly, the USDA estimates this will mean another $11 million head of cattle will be required to utilize the kind of RFID tags that we provide. We anticipate that over the next 1 to 2 years we will be the primary beneficiary of this rule change as we already are the largest provider of tags to the cattle industry. This is an important milestone in the USDA's ongoing implementation of ADT. In anticipation of this rule change, we have been ramping up our capacity to meet this demand, including now carrying our largest inventory of tags ever as well as investing in strengthening our IP and certification programs related to our CARE brand.

On the topic of investments, we are constantly challenged to allocate our capital in ways that enhance shareholder value. In past years, this has taken the form of the M&A transactions that expanded our services portfolio and brought new talent to the company. It has also involved investing in internal development of new products and programs, our very successful CARE program being one recent and timely example.

Over the past few years, we have begun investing in a share repurchase program that in 2022 returned approximately $3.5 million in value to our shareholders. During the year we repurchased nearly 308,000 shares of stock at an average price of $11.23 per share – well below our recent stock price level and more than triple the buyback level of the prior year. Over the past two fiscal years – between buybacks and a special dividend – we have returned approximately $5.5 million in value to stockholders.

Our commitment to returning value is made possible by our historical profitability and the consistency and predictability of our cash flows. In addition, the moat we have built around business – and the unique aspects of our product and service portfolio – give us confidence that our share price in recent years represents an attractive investment opportunity and a good use of capital.

Today we have the industry's largest and most diverse portfolio of verification and certification standards and solutions, and we are the undisputed leader in protein certifications, which is the largest component of our business. Given this competitive advantage, we are confident that as long as consumers value transparency in the food supply chain – and as long as producers continue to benefit financially and reputationally from providing that transparency – then we are going to continue to grow and generate cash and reward our stockholders.

As we have demonstrated throughout the year, we are continuing to innovate with new services in response to emerging industry trends and consumer demand. In 2022 we expanded our CARE program across all proteins, made solid progress in our aquaculture initiative – including introduction of our FishCARE program – and engaged more deeply in the emerging ESG movement.

More recently, in January we rolled out another new certification standard called PaleoFLEX™, which is tied to the popular Paleo Diet®. Legacy customer Lone Creek Cattle Company's Certified Piedmontese Beef became the first brand in North America to be certified to the new standard, and as the exclusive third-party certification body for PaleoFLEX, we are excited about this opportunity and looking forward to adding new customers for this service over time.

Also in early January, we traveled to New York with other team members to ring Nasdaq's closing bell in a Covid-delayed celebration of our uplisting to Nasdaq. The event was broadcast "live" on the Nasdaq Tower in Times Square as well as across financial media and on Facebook Live and Twitter Live, and we think the trip was well worth it in terms of the exposure we gained in the financial community.

So, thanks again for joining us on the call today. And with that, I'll open the call to questions.

**Question and Answer Session:**

**Question 1: Chris Brown**

Thank you. I was just going to ask about your Bitcoin investment, took me a little bit by surprise. Can you just talk a little bit about the thought process behind it? Thank you.

**John Saunders**

Sure. Yes. It's actually a relatively long story that culminated with us diversifying a really, really small part of our cash into Bitcoin. About 5 years ago, Chris, we were at the beginning of the cryptocurrency and blockchain craze and had a number of our customers ask us about cryptocurrencies and about utilizing blockchain, probably the most prominent being the Food Trust, which is an IBM blockchain that they developed. And really, I fielded a number of questions over the years. I don't know if you've been on the calls or not really related to blockchain and what impact it was going to have on Where Food Comes From, especially the way that the data could be stored in this new format. And it was questions that were related to how were we going to position the company as opposed to blockchain or as – was it going to be something that was going to eliminate the opportunity for us to continue to grow. So I've done a lot of evaluating it. We looked at Bitcoin. I think our determination was – we've actually had larger companies that have come to us and asked us to potentially develop our own cryptocurrency. So really the culmination of that was us purchasing a really, really small amount of Bitcoin. We felt that was the only one that justified doing it. We didn't understand a lot of the accounting principles, but we thought it was something that was going to be core to the business. So it was really less of any kind of speculation into cryptocurrency as much as it was us positioning ourselves to understand the accounting that some of our potential customers were going to ask us to be a part of. So it was really just positioning there. It wasn't a long-term strategy.

**Chris Brown**

That makes complete sense, and I appreciate the color. Thank you. I commend your openness to kind of in a measured manner, looking at different opportunities and different things out there. Thanks. Good luck.

**Question 2: Unidentified Analyst**

Hey, John, I just wanted to say thank you again for being a respectful steward of capital. It's very rare to have a micro-cap company who is as efficient and conservative with capital as you guys are. And I think that, that earns you the trust of shareholders to carry out your longer-term vision.

**John Saunders**

Thank you.

**John Saunders**

Well, again, I want to thank you. I figured maybe we'd have one question about ADT. I do want to reemphasize what a big event for us, what a change in this ruling is, and we're really excited about this year. We appreciate all of your support, your long-term commitment and a lot of the stuff that we've been talking about related to animal disease traceability in the U.S. cattle industry, I think, are starting to formalize. So we appreciate your patience and we appreciate your support, and we will talk to you soon.

**Operator**

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.