SOURCE: Where Food Comes From

Where Food Comes From

November 14, 2013 07:00 ET

Where Food Comes From®, Inc. Reports Third Quarter Results

Recent Acquisition and Strategic Partnership Add Approximately 4,000 New Customers and More Than $2.0 Million in Projected Annual Revenue, Positioning the Company for Long-Term Profitable Growth

CASTLE ROCK, CO--(Marketwired - Nov 14, 2013) - 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 third quarter and nine month period ended September 30, 2013.

"Growth in demand for our Non-Hormone Treated Cattle (NHTC) and Verified Natural Beef (VNB) programs partially offset age and source revenue that was lower due to Japan's easing of beef import requirements earlier this year," said John Saunders, chairman and CEO. "We are pleased that the majority of our ranch source and age customers remain committed to continuing their annual audit activities. Additionally, we added 3,000 new producer customers at the end of the third quarter through our acquisition of the auditing business of Validus Ventures -- a transaction that expanded our food group coverage and added new auditing standards to our services portfolio. Early in the fourth quarter, we added an additional 1,000 new producer customers by assuming management of Micro Technologies' process verification program. We now perform audits for more than 10,000 customers, an approximate 66% increase over 2012 year-end.

"We were solidly profitable in the third quarter prior to incurring significant legal and advisory costs associated with the Validus acquisition. We believe the Validus and Micro transactions, which we project will bring us an additional $2.0 million in annual revenue, put us in a strong position to achieve profitable growth in 2014 and beyond. In the meantime, we continue to evaluate M&A opportunities that can expand our solutions portfolio and consolidate our leadership position in this growing industry. We now audit to more than 20 standards in all major food groups."

Third Quarter Results
Third quarter revenue decreased slightly to $1,470,200 from revenue of $1,545,200 in the third quarter last year. Verification services revenue was $1,181,800 versus $1,237,200 year-over-year, while hardware revenue, consisting primarily of cattle identification tags, was down slightly to $263,300 from $268,800. The lower verification and hardware revenue was attributable to Japan's easing of import requirements resulting in lower source and age verification revenue. The Company expects these reductions to be more than offset over time by growth in other verification categories in combination with new revenue streams resulting from M&A activities. Labeling revenue in the third quarter was $25,000 versus $39,200 in the same quarter last year. In November the Company announced that Heinen's fine foods has expanded its labeling program to include all lamb products in its meat case.

Selling, general and administrative expenses in the third quarter were $715,700, a slight increase over $686,500 in the same quarter last year.

During the third quarter the Company incurred significant transaction costs in the acquisition of Validus. As a result, the Company reported a net loss attributable to Where Food Comes From, Inc. of $18,800, or less than $0.01 per share, versus net income of $63,600, or less than $0.01 per share, in the same quarter last year.

Nine-Month Results
Revenue through nine months of 2013 was $3,736,400 versus $3,971,600 in the same period a year ago. Verification revenue decreased to $3,099,000 from $3,255,300 year over year. Hardware revenue was $544,200 versus $626,000 a year ago. Revenue from Where Food Comes From and other sources increased to $93,200 from $90,400.

Selling, general and administrative expense year-to-date increased to $1,905,900 from $1,755,900. 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 $219,000 in transaction costs associated with the Validus acquisition, the Company reported a net loss attributable to Where Food Comes From, Inc. of $22,200, or less than $0.01 per basic and diluted share, in the first nine months versus net income of $730,200, or $0.04 per basic and $0.03 per diluted share, in the same period last year. The 2012 period included an income tax benefit of $363,000.

Balance Sheet Highlights
During the third quarter the Company paid $565,000 in cash as part of the acquisition of Validus Ventures. Cash and cash equivalents at September 30, 2013, totaled $1.0 million versus $1.4 million at 2012 year-end. Working capital was $1.5 million versus $1.7 million.

Conference Call and Webcast
The Company will conduct a conference call today at 8:00 a.m. Mountain Time.

The call-in numbers for the conference call:
Domestic Toll Free: 1-877-941-8609
International: 1-480-629-9692
Conference ID: 4649684

Phone replay:
A telephone replay of the conference call will be available through November 28, 2013, as follows:
Domestic Toll Free: 1-800-406-7325
International: 1-303-590-3030
Conference Code: 4649684

About Where Food Comes 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.

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; plans to expand the Company's product/service portfolio; positive customer retention trends; expectations for annual revenue to increase by $2.0 million due to acquisitions and partnerships; 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 third quarter and nine-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.

             
             
Where Food Comes From, Inc.       
Statements of Income (Loss)       
(Unaudited)       
             
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
                                 
Revenues                                
  Service revenue   $ 1,181,777     $ 1,237,215     $ 3,098,976     $ 3,255,266  
  Product sales     263,344       268,750       544,212       625,986  
  Other revenue     25,041       39,196       93,234       90,375  
    Total revenue     1,470,162       1,545,161       3,736,422       3,971,627  
Costs of revenue                                
  Labor and other costs of services     563,392       543,362       1,432,278       1,387,499  
  Costs of products     192,086       198,862       396,164       454,279  
    Total costs of revenue     755,478       742,224       1,828,442       1,841,778  
Gross profit     714,684       802,937       1,907,980       2,129,849  
Selling, general and administrative expenses     715,652       686,538       1,905,933       1,755,873  
Income (loss) from operations     (968 )     116,399       2,047       373,976  
Other expense (income):                                
  Interest expense     17,803       6,068       29,872       19,761  
  Gain on sale of marketable securities     -       (9,581 )     -       (12,155 )
  Other income, net     (381 )     (556 )     (1,115 )     (3,909 )
Income (loss) before income taxes     (18,390 )     120,468       (26,710 )     370,279  
Income tax expense (benefit)     (11,019 )     46,500       (12,229 )     (362,972 )
Net income (loss)     (7,371 )     73,968       (14,481 )     733,251  
Net income attributable to non-controlling interest     (11,408 )     (10,336 )     (7,763 )     (3,063 )
Net income (loss) attributable to Where Food Comes From, Inc.   $ (18,779 )   $ 63,632     $ (22,244 )   $ 730,188  
Net income (loss) per share:                                
  Basic   $ *     $ *     $ *     $ 0.04  
  Diluted   $ *     $ *     $ *     $ 0.03  
Weighted average number of common shares outstanding:                                
  Basic     21,879,648       21,063,153       21,626,558       20,843,311  
  Diluted     21,879,648       21,798,484       21,626,558       21,571,396  
                                   
                                   
                                   
Where Food Comes From, Inc.             
Balance Sheets             
             
    September 30,     December 31,  
    2013     2012  
ASSETS   (unaudited)        
Current Assets:                
  Cash and cash equivalents   $ 1,037,584     $ 1,403,489  
  Accounts receivable, net     620,984       377,072  
  Prepaid expenses and other current assets     107,516       80,189  
  Deferred tax assets     255,173       242,944  
    Total current assets     2,021,257       2,103,694  
Property and equipment, net     142,419       146,563  
Intangible and other assets, net     1,874,792       303,810  
Goodwill     1,279,762       532,997  
Long-term deferred tax assets     277,177       277,177  
Total assets   $ 5,595,407     $ 3,364,241  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 249,415     $ 134,913  
  Accrued expenses and other current liabilities     53,981       58,808  
  Customer deposits     18,859       27,478  
  Deferred revenue     155,882       139,022  
  Short-term debt and current portion of notes payable     24,397       22,873  
  Current portion of capital lease obligations     4,119       5,506  
    Total current liabilities     506,653       388,600  
Capital lease obligations, net of current portion     11,871       14,981  
Notes payable and other long-term debt, net     171,363       191,106  
Notes payable, related party     -       200,000  
Total liabilities     689,887       794,687  
Contingently redeemable non-controlling interest     1,004,974       -  
Stockholders' equity:                
  Common stock     23,233       21,837  
  Additional paid-in capital     5,046,856       3,668,556  
  Treasury stock     (150,849 )     (121,294 )
  Accumulated deficit     (1,309,784 )     (1,287,540 )
  Total Where Food Comes From, Inc. equity     3,609,456       2,281,559  
  Non-controlling interest     291,090       287,995  
Total Equity     3,900,546       2,569,554  
Total liabilities and stockholders' equity   $ 5,595,407     $ 3,364,241  
                 
                 

Contact Information

  • Company Contacts:

    John Saunders
    Chief Executive Officer
    303-895-3002

    Jay Pfeiffer
    Pfeiffer High Investor Relations, Inc.
    303-393-7044