8-K

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): March 4, 2014

WHERE FOOD COMES FROM, INC.

(Exact Name of Registrant as Specified in its Charter)

Colorado
(State or Other Jurisdiction of
Incorporation) 333-133634
(Commission File Number) 43-1802805
(I.R.S. Employer Identification No.)

221 Wilcox, Suite A
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))

Item 2.02 Results of Operations and Financial Condition

Reference is made to the Where Food Comes From, Inc. (the “Company”) press release on March 4, 2014, 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 to date period ended December 31, 2013.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Press Release issued dated March 4, 2014
99.2	Transcript for March 4, 2014 conference call

SIGNATURE

     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. (Registrant)
	By:	/s/ Dannette Henning
Date: March 10, 2014		Dannette Henning
		Chief Financial Officer

EX-99.1

Where Food Comes From, Inc. 8-K

Exhibit 99.1

FOR IMMEDIATE RELEASE	NEWS
March 4, 2014	OTCQB: WFCF

Where Food Comes From^®, Inc. Reports Fourth Quarter and Full Year Results

Fourth quarter revenue up 39% to $1.8 million from $1.3 million last year

Full year revenue up 5% to $5.5 million from $5.3 million in prior year

Company adds 4,000 new producer customers through M&A and strategic partnership deals during 2013

CASTLE ROCK, Colo. – Where Food Comes From, Inc. (d.b.a. IMI Global, Inc.) (OTCQB: WFCF), the trusted resource for third-party verification of food production practices,today announced results for its fourth quarter and full year period ended December 31, 2013.

“We are pleased to report renewed revenue growth in both the fourth quarter and 12-month period,” said John Saunders, chairman and CEO. “This growth reflects M&A activity along with increased demand for the Company’s non-hormone treated cattle (NHTC) and Verified Natural Beef programs as well as an increase in source verifications in international markets. These growth factors combined to more than offset a sharp decline in Japanese age and source verification revenue in 2013 due to Japan’s easing of import restrictions. We believe most of the impact of Japan’s action will have been absorbed by the end of the first quarter of 2014 and that we can reestablish a consistent long-term revenue growth trend.

“While we continue to generate positive cash from operations and positive operating income, our bottom line has been impacted over the past year by M&A-related costs and expenses along with the effects of Japan. Our M&A activity, which included one acquisition and one strategic partnership, added more than 4,000 new customers and strengthened our position as the nation’s leader in verification in the food industry. With transaction costs behind us and as we progress through the integration process with these new businesses, we expect to achieve increased efficiencies and improved profitability over the long term.”

Fourth Quarter Results

Fourth quarter revenue increased 39% to $1,797,000 from revenue of $1,289,700 in the fourth quarter last year. Verification services revenue was $1,583,800, up 48% from $1,073,000 year-over-year, while hardware revenue, consisting primarily of cattle identification tags, was down slightly to $179,200 from $183,100 due to fewer ear tags sold in conjunction with age and source verification for Japan. Labeling revenue in the fourth quarter was up slightly to $34,000 from $33,600 in the same quarter last year.

Gross profit in the fourth quarter increased 14% to $798,400 from $700,100 year over year. Selling, general and administrative expenses in the fourth quarter were $773,200, a 32% increase over $585,600 in the same quarter last year. The increase was primarily attributable to assumption of ongoing SG&A costs for Validus.

Net loss attributable to Where Food Comes From, Inc. in the fourth quarter was $11,300, or less than one cent per share, compared with net income of $140,300, or $0.01 cent per share, in the same quarter a year ago. The year-ago fourth quarter included an income tax benefit of $28,500.

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Full Year Results

2013 full year revenue increased 5% to $5,533,500 from $5,261,400 last year. Verification revenue increased 8% to $4,682,700 from $4,328,300 year over year. Hardware revenue was $723,400, down 11% from $809,100 a year ago. Revenue from Where Food Comes From labeling and other sources increased slightly to $127,300 from $124,000. The increase in verification revenue reflected M&A activity along with increased demand for the Company’s non-hormone treated cattle (NHTC) and Verified Natural Beef programs as well as an increase in source verifications in international markets. These growth factors combined to more than offset a sharp decline in Japanese age and source verification revenue in 2013.

Selling, general and administrative expense increased 14% in 2013 to $2,679,100 from $2,341,700. This increase reflected legal and advisory costs associated with the Validus acquisition, partially offset by general cost reduction measures undertaken by the Company.

Inclusive of $218,700 in transaction costs associated with the Validus acquisition, the Company reported a net loss attributable to Where Food Comes From, Inc. of $33,600, or less than one cent per share, versus net income of $870,400, or $0.04 per share, in the prior year. The 2012 net income of $870,400 included an income tax benefit of $391,500.

Balance Sheet Highlights

Cash and cash equivalents at December 31, 2013, totaled $1.1 million, which is up from $1.0 million in the third quarter of 2013 but down from $1.4 million at 2012 year-end due to cash consideration paid in the Validus acquisition and transaction costs associated with all M&A activity. Working capital was $1.5 million at 2013 year-end versus $1.7 million in working capital at the end of 2012.

Conference Call and Webcast

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

The call-in numbers for the conference call:

Domestic Toll Free: 1-866-225-8754

International: 1-480-629-9819

Conference ID: 4671682

Phone replay:

A telephone replay of the conference call will be available through April 4, 2014, as follows:

Domestic Toll Free: 1-800-406-7325

International: 1-303-590-3030

Conference Code: 4671682

About Where FoodComes From, Inc. 

Where Food Comes From, Inc. (d.b.a. IMI Global) is America’s trusted resource for third party verification of food production practices. The Company supports more than 10,000 farmers, ranchers, processors, retailers and restaurants with a wide variety of value-added services through its IMI Global, International Certification Services, and Validus Verification Services units. In addition, the Company’s Where Food Comes From® retail and restaurant labeling program utilizes the verification of product attributes to connect consumers to the sources of the food they purchase through product labeling and web-based information sharing and education. Go to

www.wherefoodcomesfrom.com for additional information.

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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; expectations to achieve profitable growth; the Company’s belief that most of the impact of changes in Japan’s import requirements has been absorbed; and the demand for, and impact and efficacy of, the Company’s and its subsidiaries’ 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 the fourth quarter and twelve-month period 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 www.sec.gov.

Company Contacts:

John Saunders 

Chief Executive Officer

303-895-3002

Jay Pfeiffer

Pfeiffer High Investor Relations, Inc.

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Where Food Comes From, Inc.

Statements of Income (Loss)

	(Unaudited) Three Months Ended December 31,						Year Ended December 31,
	2013			2012			2013			2012
Revenues:
Service revenues	$	1,583,762		$	1,073,011		$	4,682,738		$	4,328,277
Product sales		179,237			183,098			723,449			809,084
Other revenue		34,042			33,631			127,277			124,006
Total revenues		1,797,041			1,289,740			5,533,464			5,261,367
Costs of revenues:
Labor and other costs of services		875,570			457,156			2,307,846			1,844,655
Costs of products		123,057			132,488			519,221			586,767
Total costs of revenues		998,627			589,644			2,827,067			2,431,422
Gross profit		798,414			700,096			2,706,397			2,829,945
Selling, general and administrative expenses		773,154			585,621			2,679,089			2,341,665
Income from operations		25,260			114,475			27,308			488,280
Other expense (income):
Interest expense		3,699			6,168			33,588			25,929
Gain on sale of marketable securities		—			263			—			(11,892	)
Gain on disposal of property and equipment		—			(3,208	)		—			(3,208	)
Other income, net		(244	)		(330	)		(1,469	)		(4,239	)
(Loss) income before income taxes		21,805			111,582			(4,811	)		481,690
Income tax benefit		10,355			(28,506	)		(1,778	)		(391,478	)
Net (loss) income		11,450			140,088			(3,033	)		873,168
Net income attributable to non-controlling interest		(22,765	)		253			(30,527	)		(2,810	)
Net (loss) income attributable to Where Food Comes From, Inc.								(33,560	)		870,358
	$	(11,315	)	$	140,341		$			$
Net (loss) income per share:
Basic	$	*		$	0.01		$	*		$	0.04
Diluted	$	*		$	0.01		$	*		$	0.04
Weighted average number of common shares outstanding:
Basic		22,868,786			20,852,052			21,893,794			20,943,966
Diluted		22,686,786			20,880,391			21,839,794			21,678,858

* Less than a penny ($0.01) per share

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Where Food Comes From, Inc.

Consolidated Balance Sheets

	December 31,			December 31,
	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	1,067,537		$	1,403,489
Accounts receivable, net		683,800			377,072
Prepaid expenses and other current assets		143,576			80,189
Deferred tax assets		190,184			242,944
Total current assets		2,085,097			2,103,694
Property and equipment, net		253,206			146,563
Intangible and other assets, net		1,716,115			303,810
Goodwill		1,279,762			532,997
Long-term deferred tax assets		480,294			277,177
Total assets	$	5,814,474		$	3,364,241
Liabilities and Equity
Current liabilities:
Accounts payable	$	277,633		$	134,913
Accrued expenses and other current liabilities		56,091			58,808
Customer deposits		39,134			27,478
Deferred revenue		149,660			139,022
Short-term debt and current portion of notes payable		24,782			22,873
Current portion of capital lease obligations		4,173			5,506
Total current liabilities		551,473			388,600
Capital lease obligations, net of current portion		10,808			14,981
Notes payable and other long-term debt, net of current portion		165,755			191,106
Notes payable, related party		—			200,000
Total liabilities		728,036			794,687
Commitments and contingencies
Contingently redeemable non-controlling interest		1,018,396			—
Equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued or outstanding		—			—
Common stock, $0.001 par value; 95,000,000 shares authorized; 23,233,483 (2013) and 21,837,046 (2012) shares issued, and 22,686,786 (2013) and 21,323,799 (2012) shares outstanding		23,233			21,837
Additional paid-in-capital		5,216,327			3,668,556
Treasury stock of 546,697 (2013) and 513,247 shares (2012)		(150,849	)		(121,294	)
Accumulated deficit		(1,321,100	)		(1,287,540	)
Total Where Food Comes From, Inc. equity		3,767,611			2,281,559
Non-controlling interest		300,431			287,995
Total equity		4,068,042			2,569,554
Total liabilities and equity	$	5,814,474		$	3,364,241

EX-99.2

Where Food Comes From, Inc. 8-K

Exhibit 99.2

2013 Year-End Conference Call Script

Call date: Tuesday, March 4, 2014

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

Jay Pfeiffer

Good morning and welcome to the Where Food Comes From 2013 year-end conference call.

During the course of this call, we will be making forward-looking statements based on current expectations, estimates and projections that are subject to risk. Specifically, our statements about future revenue, expenses, profitability, cash, growth strategy, market acceptance of the Company’s products and services, and potential acquisitions are forward looking statements. Listeners should not place undue reliance on these statements. 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 about the Company. At present it is the Company’s policy not to provide specific guidance with respect to future revenue and earnings expectations or new customer wins.

I will now turn the call over to John Saunders, chairman and chief executive officer.

John Saunders

Thank you, Jay.

Good morning, everyone, and thanks for joining us today.

2013 was an eventful and successful year for Where Food Comes From.

We continued to execute on our M&A strategy, closing one acquisition and one strategic partnership that combined to add approximately 4,000 new customers for us – a big increase in our customer base in 2013. Our September acquisition of the auditing business of Validus – one of our primary competitors – has been a great success for us by any measure. Validus is the US leader in independent certification of socially responsible production practices covering pork, poultry and dairy. They are ISO 9001: 2008 certified with more than 10 years of on-farm auditing of animal welfare, environmental, security and worker care production practices. They are a third-party verifier for the National Milk Producers Federation’s National Dairy FARM Animal Care program, and an auditor for the United Egg Producers’ 5 Star Food Safety Program. In short, in addition to bringing 3,000 new customers to Where Food Comes From, Validus overnight added a whole new dimension to our business. As a bonus, our two organizations and leadership teams have proven to be an ideal fit culturally and philosophically, which is always a plus during the integration process – which has gone very smoothly.

One more quick point while I’m discussing Validus. Some of you who follow our industry carefully may have read about the USDA’s decision in Q1 of this year to discourage on-farm pork audits as a means of minimizing the spread of the Porcine Epidemic Diarrhea Virus that’s making the rounds today in the industry. This virus thrives in cold weather. As a result, Validus is having to push the majority of its pork audits out of the first half of 2014 and into the second half. This, in turn, will impact Validus’ revenue early in 2014.

Returning to the subject of M&A. In October we closed on a joint marketing agreement with MicroBeef Technologies under which we assumed management of Micro’s process verification program covering audits

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for approximately 1,000 new customers, including ranchers, feed yards and backgrounders. Our agreement also calls for our two companies to collaborate on new solutions for the beef industry.

I want to note that our M&A transactions – including the ICS purchase in 2012 – have been paid for using only cash on hand. At the same time, we’ve continued to generate cash from operations and maintain a strong balance sheet.

Where Food Comes From reported solid year-over-year revenue increases for both the fourth quarter and full year. In Q4 revenue grew by 39% to $1.8 million from $1.3 million in the same quarter last year. That included a 48% increase in verification revenue – to $1.6 million from $1.1 million. For 2013 revenue increased by 5% to $5.5 million from $5.3 million. Again, verification revenue growth led the way with $4.7 million, up 8% from $4.3 million a year ago.

Our growth was attributable to M&A activity along with increasing demand for our Non-Hormone Treated Cattle and Verified Natural Beef programs, and we’re also seeing higher demand for source verifications in domestic markets. All of these activities combined to more than offset the loss of Japanese source and age revenue that began in the fourth quarter of 2012 and continued on throughout 2013. As a result of Japan easing its beef import regulations, we experienced roughly a 65% decline in this segment of our business in 2013. And by the way, we think that by the end of Q1 of 2014 – the current quarter we’re in – we will have incurred the full impact of the Japanese change in market dynamics. The good news is – our ability to overcome this amount of lost revenue underscores the resiliency of our business model, which relies on diversification of our solutions mix and the addition of new customers through a combination of internal solutions development and acquisition of complementary solutions.

The Japan situation and our M&A activities had the effect – temporary, we believe – of depressing our profitability in 2013. Although I have spoken often about our commitment to operating on a profitable basis, we believe M&A gives us the best opportunity to generate consistent profitability over the long term. Consequently, we think trading some short-term profitability for fairly dramatic increases in marketshare is good business. And besides, if we aren’t buying these companies and capturing their customers and revenue streams, we believe someone else will. I’ll also reiterate that we continue to generate positive cash flows.

Now a few comments on our labeling program. Revenue was up slightly for Q4 and the full year but we did not add any new customers for the program this year and contribution to overall revenue remains modest. As previously discussed, the sales cycle is long and laborious and the reality is that many of the retailers we are speaking to – although very intrigued – have not yet embraced the urgency that we think they ultimately will as consumer demand for transparency in the food chain continues to gain momentum. On a positive note, our flagship grocery customer – Heinen’s Fine Foods, now with 19 stores in Ohio and Illinois – continues to expand their labeling initiative and show a deep, long-term commitment to the program. In November Heinen’s announced it expanded Where Food Comes From labeling beyond beef to now include lamb and chicken products.

I mentioned earlier our big increase in customers during 2013. While that is indeed a solid accomplishment for us, we also believe we’re just scratching the surface of our potential to rapidly expand our verification services over the next few years. Right now we see three primary drivers for this growth. One, obviously is consumer pull through. Every day we read more about consumer demand for transparency. Two, a food related event of some kind that causes a sea change in government regulation of food producers. And three, the USDA’s Animal Disease Traceability (ADT) program that, in theory at least, applies to upwards of 800,000 beef producers nationwide. 800,000 is a big number compared to our current customer base of about 10,000. Where Food Comes From now audits in the beef, poultry, lamb, eggs, dairy spaces – to more than 20 standards that include source and age, humane handling, natural, organic, gluten free and others. We have the largest solutions offering in the industry. We have a technology-based platform capable of scaling rapidly to meet a

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surge in demand. In short, we believe we are increasingly setting ourselves apart as the obvious choice for producers who are considering – or may soon be forced to subscribe to – verification services.

I’ll close with a quick comment on our news release of February 28th detailing our acquisition of the Merck Animal Health verification business. This transaction was interesting for a couple reasons. First, of course, is the addition of new customers and revenue streams. But we’re also gratified that a company of Merck’s stature entrusted their customers to us – a testament to the solid reputation for excellent customer service that our IMI Global auditing unit has established in the industry. Also interesting is the fact that we are adding a large number of dairy customers – further strengthening our foothold in that important niche, where a portion of newborn calves are already subject to the USDA’s ADT program.

As always, we at Where Food Comes From appreciate your time and attention on the call today. And also for your support of our efforts to build a sustainable business model capable of building value for its stockholders for many years to come.

Operator, I’ll now open the call to questions….

Summary of Question and Answer session:

· Expectation for gross margins in the near future: we probably will not return to pre-M&A gross margin levels but eventually we think the economies of scale and diversification that we gain by creating this platform of broader capabilities around our auditing and verifications services should improve our gross margins over time.

· Timeframe for listing with one of the Exchanges: we would like to list as soon as possible but unknown at this time.

· We believe the top trends in the industry are:

1. non-GMO: there is a large disconnect between retailers and consumers who both are concerned. There are dramatic changes and positive movements in the responses of food producers and sustainability. Where those two markets meets remains to be seen but we continue to pursue labeling or verification around the use and feeding of genetically modified product.

2. Animal Welfare and Gestation Crate: PEDvirus is currently going through the pork industry and the business risk that auditors going through the barns may be transmitting the disease.

3. Source verification and the local movement of regionally produced products

· Opportunities for us in the next 12-18 months: the export market and record high beef prices

· Backing out the effect of Japan upon the core business: we hesitate to provide a specific answer because we estimate that our S&A business dropped approx. 65% but many of our customers have converted to higher levels of verification. Our GAP business continues to grow and expanding to pork and poultry with strong demand from our ranch customers. We have been able to absorb the change in business where 24 months ago when S&A represented over 60% of our total business, and now our revenue numbers stay relatively flat through diversification and expanding, is a major accomplishment. Many of our competitors are no longer in the market and so we are taking leadership position not only on the beef side, but also on the dairy and pork side with Validus. ICS continues to grow their organic business presenting a long-term opportunity as well.

· In the M&A pipeline: Seafood is an opportunity but we also see opportunity within our existing markets in different regions

· Status of branding programs in light of the shutdown of the Brawley processing plant: we are working with our customer to develop an alternative solutions for the processing and supply of product to Heinen’s. We are confident that we will be able to accomplish our goal.

· Seasonality of production, sourcing, supply and demand upon the labeling program: seasonality creates challenges in promoting the WFCF brand especially if the product is “natural.” For example, in the EU during spring, premiums associated with producers who both produce and feed NHTC cattle are extremely high compared to late summer when higher numbers of cattle are coming through that meet qualifications. There is a caveat in that Heinen’s product is a dairy product meaning that it is beef raised from Holstein’s which do not have the same seasonality issues. Because of the shorter production cycles of chicken and pork which is 4-5 months compared to about years for beef, we have moved a lot of resources into marketing and promoting our labeling programs over to Validus.

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.

· We have the capacity to add another distributor the size of Heinen’s but we do it in partnership with producers too. Sometimes a retailer can make the decision to move forward but they must have a supplier that is willing to go through the verification process too. It takes working with a retailer and producer simultaneously where everyone sees value in the program and it can be a struggle with meat prices as high as they ever have been.

· Regarding consolidation in the industry, can we increase our prices on services? We haven’t seen that yet but there is opportunity for bundling which means that we essentially charge more per audit but the producer gets more value too. For example, a dairy may undergo 4-6 different audits throughout a year where we are able to compress the verifications in one single audit that we conduct. We can cut their price of the total costs of the audit in half but increase our internal revenue because of the bundling of the programs.

· Regarding supermarkets and the logistics issue: we work with both the chain and the suppliers simultaneously and the dynamics within the industry. Working with them is a team environment. The real question is how to get the consumer willing to pay for the extra value while recognizing the brand to be able to pull it through and reward everybody in the process for doing it. Because if we are add costs, complications and different requirements to the program then there must be a nugget at the end of the chain so everyone gets paid for it.

· How the GMO market is evolving our sales efforts: the use of GMO is significantly changing the way producers run their operations today, for example, the use of no-till technology. If we go with consumer demand as a producer, it is still not clear whether the GMO issue applies to meat (what the animals are eating) because as far as we know today, there is no specific test for GMO’s influence in meat. We are spending about 20% of our time focused on these new issues.

Closing remarks from John Saunders.

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