Greetings and welcome to the Where Food Comes From Third Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Jay Pfeiffer, Investor Relations. Thank you sir, you may begin.

Good morning and welcome to the Where Food Comes From 2014 third quarter 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, new customer wins, new product and services, market acceptance of 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 at website for more information about the Company. At present it the Company’s policy not to provide specific guidance with respect to future revenue and earnings expectations or new customer wins. With that, I’ll turn the call over to John Saunders, Chairman and Chief Executive Officer.

Thanks, Jay. Good morning and thanks for joining us today. This morning we announced very solid financial results and I’d like to recap a few of the highlights. For the third quarter on a year-over-year basis, total revenue increased 69% to 2.5 million from 1.5 million. Verification services revenue increased 73% to 2 million from 1.2 million. This increase included both organic and acquisitive growth. So in addition to solid performances by our IMI Global and ICS verification businesses, the year-over-year Q3 comparisons were heavily impacted by new revenue streams resulting from last September’s acquisition of Validus auditing business. Product revenue comprised of cattle identification ear tags increased 57% to $414,000 from $263,000. This was largely organic growth from two areas: one, we have recently taken over tag sales at one of our key legacy customers, Superior Livestock Options; and two, an increase in dairy cash tag sales resulting from that segment of the beef production world being the first to begin complying with the USDA's mandatory animal disease traceability program known as ADT. And finally, Where Food Comes From labeling program revenue increased to $25,600, up 2% year-over-year. Gross profit in Q3 grew 65% in real dollars. The gross margin declined a couple of points year-over-year due to the impact of the Validus acquisition on our overall margins. Remember, Validus generally employs full time auditors versus our traditional waiting towards part time auditors. This played a bigger than usual role in margins the last couple of quarters because, as you recall, Validus revenue has been impacted this year by a sharp reduction in pork audits resulting from the Porcine Epidemic Diarrhea Virus or PEDV. We are pleased to report that selling, general and administrative expenses grew by just 8% to 775,000 from 716,000 year-over-year. SG&A expense as a percent…

Thank you. (Operator Instructions) Our first question comes from the line of Ian Cassel with MicroCapClub. Please proceed with your question.

My question relates to one of the comments you said later on in the call in your prepared remarks. I mean that’s about the GMO ballot initiatives that are coming up here shortly. And I think you mentioned 30 states, I know Colorado and Oregon seem to be the hot ones here, your home state there. Can you maybe talk a little bit more about how the GMO ballot initiatives might impact your business?

It’s been interesting how many questions we’ve gotten from I think investors and shareholders, but also just from family and friends. And Leann Saunders, the President of the Company, is sitting here and she’s been working pretty specifically in this area. So I am going to let her answer that question, Ian.

I think as we look at the different ballot initiatives, as you said, they’re all tied to the transparency of labeling. So for our business, that’s a good trend. There is a lot of complexity tied to that. We’re currently an approved technical administrator, IMI Global is, for the non-GMO project certification program and we’re also through ICS have organic certification which are both of those particular programs from a voluntary perspective are non-GMO labeling in nature. So we’re already participating in that movement with those two voluntary programs. When you look at the regulatory complexity tied to some of the ballot initiatives, it’s really going to depend on how those things fall out. Some of the struggles with that across the country are obviously you have retailer s like a Whole Foods and some of these retailers that are really committed to providing the transparency that are challenged because you have different regulations in different states which makes it very complex for them to comply. So, we’re trying to, as we’re advising different groups, just to try to figure out how this all works. But today we’re working very diligently on the voluntary side and let’s just say for our business specifically that transparency and labeling is a positive trend.

Our next question comes from the line of Marc Robins with Catalyst Research. Please proceed with your question.

I guess my question is really kind of more fundamental and I apologize for the simplicity of it. But in the last statement you said the national and international food companies, I didn’t hear the whole thing and I’d like a little better explanation of what you’re implying. It’s a very simple question, John.

Well, specifically I think probably two companies that you can or two situations you can look at, one is Tesco and the horse meat situation and the resulting financial difficulties that they’ve experienced and then the second is McDonald's and the situation that occurred in China which have resulted in 7.3% decline -- this is McDonald's numbers, these aren't our numbers. Their share price dropped – the company had a $0.20 per share drop in earnings per share and this was a result of the 7.3% decline in sales in McDonald's Asia, Middle East and Africa unit. So those are just two big ones. But I think what we’re seeing, whether it pertains to the export of non-hormone treated beef to the EU which also involves a number of international politics between different exporting nations that are trying to access that premium market, but you’re still restricted on the technology that you can use to what we’re seeing with China and the restrictions around the use of Ractopamine for pork that's produced in the United States. And all of the companies that we work with and a lot of them are the multinational companies including McDonald's and Wal-Mart are facing these issues today. So that’s essentially it.

Let me ask this question. Are you beginning -- and maybe it’s inappropriate -- are you beginning to see interest from foreign producers who are facing these same kind of, I'm not going to say roadblocks, but requirements to export further into the Brazil is a huge exporter of beef I believe. Would they ever come to you for your verification capabilities?

We hope so. We really do. Again, I’ve mentioned in the past the risk I believe is associated with us conducting verification audits in other countries, the products that are going to be done either here in the United States or other places. So, we have so much oversight within our business, Marc, through the USDA and through other regulatory and standard setting bodies that I just haven't felt comfortable in our ability to do that. But we’ve had a lot of producers ask us in specifically Brazil to come down and to try to address that market, but we haven’t found the right way to do it yet or the right partner.

(Operator Instructions) Our next question comes from the line of Matt Karr with Symons Capital. Please proceed with your question.

Just a couple of quick ones from me on the organic business, I guess. Relative to last quarter you spoke last quarter about the resumption of pork audits happening slowly, but it was happening. Relative to last quarter, are we improving there or is it about the same and it should just take a little bit longer?

About the same. I think we have, due to a number of factors we've seen the audits that we’ve conducted stayed at a pretty strong level in the sense that we haven’t seen -- it hasn’t stopped. The other big factor there, Matt, is that once a facility becomes dirty in a sense that it's been exposed, it moves into another area or segment of those operations that don’t have the same concerns around introducing the virus into their facility. So I think I’ll just leave it and say it’s been -- it hasn’t resumed to where it was before, but it also hasn’t changed in a significant way.

And then are you guys able to I guess ballpark the organic growth rate for the business this quarter? Is that something we should kind of just wait till it tees out of the cue?

It’s very difficult for us to do that. One of the benefits of our strategy in working together is that we increase our knowledge base within the companies and we have a lot of interaction between the companies, but we also have -- because all the businesses are very similar business models, that’s why we only have one verification category for our revenue because so much of what we do is bundling and we work together to try to provide customers the best and most efficient service we possibly can, which means that we don’t get down to that level in understanding. And if I did, I’d just be guessing.

And then last question from me I guess. If you go back and look at the annual reports that you guys have filed for a really long time. The names of key competitors have been relatively the same for a long period of time. And as you guys have done acquisitions and taken out some of your arguably bigger competitors, the names on that list are generally dwindling. So you talk about having a lot broader of a business in terms of commodity coverage in the suite of verification products. But can you maybe just size the market for me a little bit in terms of how many companies are left in this business and maybe the names of some of those that are still credible threats to you guys?

The best way to answer that I think is that when we initially started that list, we were in a much smaller, if you will, pond that we were swimming and that was most specifically the beef verification market in the United States. So a number of those competitors and I would say there is probably others on the call that would say hey we’ve done a good job with our M&A strategy because that list has continued to dwindle. At the same time, our pond has grown and it's grown in unique ways. And part of the reason I am a little wishy washy here, Matt, is that within the organic market, that’s NOP in the United States, I believe there is about 50 different organic verification companies, but there is a very small number of them that represent a significant portion of that. As we moved into GMO labeling and verification and gluten free, we’ve kind of inherited new competitors. And while I think it’s -- we have a very good idea internally who that is, it’s a different set of companies and we’ll continue to I think provide more detail about who those companies are and what they do, but right now our continuous plan is to continue to grow and we’re going to do that organically and through M&A. So as we do that, we want to be pretty careful about how we talk about that and I’m not prepared to talk about any of those companies today primarily for that reason.

Our next question comes from the line of David Morgan, a private investor. Please proceed with your question.

I have a follow up on the beef side. Competitor-wise you almost do 80% to 90% of the market as far as verification and taken that practically, everyone is a viable competitor?

There is a few more, again, pretty regional, that have been around not quite as long as us, but there's just a few more. We have consolidated the majority of it.

Okay. And then as far as a national company coming to you to verify beef -- or do you have a footprint at this point where you can take that on a national company for beef verification or pork verification or do you have to still expand as far as the tagging and acquisitions?

We still have to continue to expand, I think, David. I think what this has done for us and specifically when you look at Sterling and Primera, they were both very heavily focused on the Holstein calf market and that’s important for a couple of reasons, one is because it’s a ratable supply, meaning you could potentially do something on a more consistent basis without have to necessarily pulling out from different states you can meet those requirements. That being said, we’re still working with -- I think it’s still daunting for the larger companies to look at and say how we’re going to be able to make this something that we can roll out across the country. So, we’re really focused on some new brands that our acquisitions have brought to us in the regional nature, but they'll allow us to continue to expand as we continue to promote Where Food Comes From to every region that we talk to.

And part of the mandating of the tags, the demand is coming from two areas, regulatory and also perhaps restaurants and grocery stores demanding it. What’s dominating the push-pull demand as far as trying to get the cattle tagged as quickly as possible?

Right now there is no questions it’s the regulatory and that’s because of what I mentioned. For cattle that are moving interstate, that aren’t destined to be processed immediately are the real ones that we're working with. And the Holstein market, calves that are born at dairies can potentially travel several times and across several states. And what I think is starting to undercurrent is that state based animal health officials are looking to the kind of identification that we provide through some of our verification solutions as an alternative for these producers that want to transport cattle across state lines and that’s really the biggest catalyst right now. What we’re doing on the private side, I think we continue to be still pretty unique in that area that we’re really one of the few entities that’s talking to retailers about a source verified traceable supply.

And as far as the regulatory mandate, you said over the next five years. How linear might that be? I mean are we going to see 20% this year? 10% out of the 100% that needs to still be done or how they're going to get tagged?

I don’t know if there is any real way to answer that. I think it’s going to depend on states and specific officials within those states and maybe other issues like other animal disease issues that they may have in that state or maybe the specific type of livestock. So it could go very, very small growth, and then all of a sudden there's an event or a situation that would immediately forestall the state officials to require this.

Like a Mad Cow or something like that that raises its head again?

It probably won’t be – it won't be Mad Cow. There's others that would be more infectious and would travel quicker that would be more dangerous. But yes, something like that.

And so far are you seeing it happening? I mean are they tagging because they have to for regulatory purposes or they’re just tagging because they just want to be able to sell their cow?

I have heard over the last couple months, David, I probably heard about half a dozen situations that range from cattle being trucked across Ohio destined for Pennsylvania that didn’t have the right identification. So very, very difficult, because there is not an entity or one -- you basically have to go to and talk to each one of the state vets at each state and ask them about what’s happened, which I've tried and I do as much as I possibly can, but it’s hard, you just hear stuff.

Well it’s pretty phenomenal. I mean you talk about the fact that you can go from 1% to 50% or even 80%, so it’s massive, but I happens. Something that you have this higher it would be very labor intensive, I guess, with the higher [indiscernible] auditors?

Not really. One of the things that we’ve talked about a lot is one, how we use technology to extend our auditors' capability, but one of the things that we really focus on a lot is keeping our headcount as low as possible and using them when we need to.

Then one last question. As far as Whole Foods, that's your biggest customer. As far as what you’re verifying there now, are you pretty much 100% of the beef and a good portion of all the other meats, chicken and pork there at this point?

Yes, we’re a majority of their beef verification and we look for opportunities everyday to work with Whole Foods and to do bundling and to work with their customers. And one of the primary drivers for us to get involved with the non-GMO initiative was to extend our capabilities with Whole Foods and to try to help them be able to offer efficient solutions for their suppliers.

Well I thought they were sort of one mandating verifier for all the meat products. So you’re saying that could come to pass or is that still what they're asking for?

I don’t know that they would ever mandate that they had one very verification solution. That wouldn’t be in their best interest. But it wouldn’t be in their best interest to just have one, but we continue to look for ways that we can do it.

(Operator Instructions) Mr. Saunders, it appears we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Great. Thanks, everyone. Have a great day.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.