Greetings and welcome to the Where Food Comes from 2018 Fourth Quarter and Year End Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I would now turn the conference over to your host, Jay Pfeiffer, Investor Relations. Mr. Pfeiffer . You may begin.

Good morning and welcome to the Where Food Comes 2018 fourth quarter and year end conference call. Joining me on the call today are John Saunders, CEO; and Dannette Henning, CFO. During the course of this call, we'll be making forward-looking statements based on current expectations, estimates and projections that are subject to risk. Statements about future revenue, expenses, profitability, cash, growth strategy, new customer wins, 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 about the Company. Today, we'll also be discussing 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. We use and we believe investors benefit from presentation of EBITDA and adjusted EBITDA in evaluating our operating performance because they provides 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. I will now turn the call over to John Saunders, Chairman and Chief Executive Officer.

Good morning and thanks for joining the call. Today, I will recap our fourth quarter and full year financial highlights and then provide an update on our business. Fourth quarter revenue increased 12% year-over-year to 4.6 million from 4.1 million. Our verification services and RFID tag segments were11% and 31% respectively and more than offset slightly lower software and related sales in the quarter. Net income attributable to Where Food Comes From increased 211,000 or $0.01 per share, a 537,000 positive swing with net loss of 326,000 in the fourth quarter last year. Adjusted EBITDA in the quarter was up 10-fold to 522,000 from 50,000 year-over-year. For the full year, our revenue increased 15% to a record 17.8 million. All four revenue segments grew by double digits. Verification revenue was up 11% year-over-years benefiting from the reopening of China's markets for U.S. beef. RFID tag sales followed suit with 33% growth for the year. We sold more than 1.2 million tags in 2018 an average 39% growth in tag sales over the past two years. In 2018, tags represented a record 12.7% of total revenue up, from 11% and 10.2% in the prior two years, respectively. On the software side, SureHarvest delivered strong year-over-year growth for both its license and consulting segments, 29% and 26% respectively. Keep in mind SureHarvest is still a relatively small company and its quarter-to-quarter revenue can and will fluctuate with the timing of consulting projects. So the important metric in our view is the full year revenue trends, which in 2018 showed 28% growth for SureHarvest combined businesses. Net income attributable to Where Food Comes From topped $800,000 or $0.03 per share in 2018, a 463% increase over the net income of 142,000 or $0.01 per share in the prior year. Adjusted EBITDA was also…

[Operator Instructions] Our first question is from Michael Potter with Monarch Capital Group. Please proceed with your question.

Congratulations on another good year and good year of growing out our offerings as well. I guess my question is that I am the only caller and we've built a great company over a period of time here, and we're certainly novel to the space. But when we look at the share price valuation there hasn't been a great deal of return to shareholders over the past several years, and it seems as if a lot of time is being spent on our outreach to our customers, which is great, which is the most important thing, but can you maybe you can explain to us what the Company strategy is in regards to outreach to the capital markets.

I'll turn that one over to Jay Pfeiffer and let him answer that one.

Actually, I'd prefer if -- honestly, if you're the CEO that's a question that you should be answering the shareholders.

Okay, well I'll tell you from my perspective and from day one, the primary objective of our and my role as CEO as you just mentioned is to build shareholder value. Over the course of being a public company and there's been a lot of times where we've focused more specifically on addressing capital markets and looking to get more exposure in those markets, and to be honest Michael, there is a couple different conferences and a couple different annual events that we getting involved with. We have specific calls to fund managers when they approach us and there are ongoing all the time. So, we actually spent quite a bit of time talking to those investors in those markets that are interested in talking to us. And we put out news I think fairly regularly that we see as dynamic, important to investors but beyond that, I don't know that there is much else that we can do as we continue to build that shareholder value.

So the outreach though it seems if people approach you, you'll accept their phone calls, but as far as being active in developing a market, it doesn't seem and that's fine if it's not the -- obviously, it's not the primary focus of the business. But maybe you could give us what the upcoming schedule is of conferences that you're going to be attending over the next, over the next 90 days?

Hey, Mike, this is Jay. We'll announce our conference schedule at some future point, but it's not just accepting incoming calls, it's proactively making outgoing calls to fund managers on a regular basis.

Then I guess the question that comes with it is you know if again, I'm just looking at a stock chart here and we're just above a five-year low in the price of our shares. After five years of growing out this company you would have expected especially, you and your wife, you would expect that the appreciation, there would be appreciation. Can you address where we are in regards to the market and how the market I guess views our company?

Again, you know, the share price, Michael, that is not, as the largest shareholders you referenced my wife and I, as the larger shareholders, our number one focus from day one and currently I think we'll continue to be building shareholder value. Which if you look at the financials and you look at the growth of the Company, you mentioned five years ago I’d challenge you go back and look at where we were from a revenue perspective five years ago and what our numbers that we just reported today, and really make a determination then around are we working to build shareholder value and how we've done that.

It’s not a challenge. Honestly, you're taking this personally and I'm not coming at you. This is more, hey, we're at a $1.90 and you guys have done an exceptional job growing the fundamentals of this company. And yet, you know, as a long time shareholder, this is where we're at. So, there seems to be a disconnect in how the capital markets are viewing the hard work that you put in right, and we need to understand why there is that disconnect because we don't want continue to make -- continue to go down a path where, hey, if the capital markets aren't, if our story isn't resonating then, obviously, we need to make sure we're communicating that story in the best possible manner.

Agreed. [Great comment] [ph]

Our next question is from Terry Thompson, a private investor. Please proceed.

Hello John, great year last year, glad to see the numbers. Couple of questions actually, first off, the small town that I'm living in now has got one of the top 10 two-year colleges in the country, and they just got - their agriculture department just started a hemp program, and they’ve made a presentation to our Lions Club and they were talking about the seed to sale. Are you familiar with that?

Yes, I am.

Is that some -- it’s my understanding what they do is they actually assign a 16-digit number to every marijuana plant where they are able to track that all the way through. Is that something that Where Food Comes From is looking at maybe getting into?

That’s a great question, Terry. As I mentioned, there is strong interface between all of the different cannabis products that are being grown and law enforcement. So, what we are engaged with some of those are funded by at a state level, so the state came up with a tracking system as it did in Colorado. And then there is other programs which are more industry based that have a software technology some of which had actually started in Canada because the market there is more mature and there's individual tracking programs which are engaged in both hemp and marijuana. Our verification and this is a distinction that I made over the years, so I’m really glad that you asked the question. Our verification is another layer to that service. So all of the individual animal tracking I wouldn’t make an analogy that it similar to what would see with ADP in the beef industry. So, there's a tagging system that each specific plant or I believe it's tied to a lot or grow location, but those are going to be different for hemp as well because it's grown in a different way. Our verification again is an overlap of that, making it very, very in our opinion, sticky solution. The reason, as I got into a little bit, the reason that the hemp industry saw this opportunity and really I believe was proactive in a unique way as an industry, was they wanted to differentiate themselves from some of what had been, the perceptions around the product and around how they wanted to create a new environment that hemp and specifically the CBD extract products would hit the market. And that's why they came forward with the solution that they did. And we see it as it's got a great foundation of stakeholders in the industry. So, it's a unique environment to kind of go from ground zero, if you will, with the hemp industry because of the Farm Bill passage. So, it's going to be a partnership between those technologies Terry, and as I have been again talking about over the last several quarters, we’re going to continue to invest in technology. So, it's something that I’m very aware of and have been tracking specifically.

Okay, great, I’m glad you’re keeping an eye on it. If you got time, I got another couple of questions. I’m leaving in an agricultural area now. I have become friends with my local state representative as a legislature here in Oklahoma. His name is John Pfeiffer. His father is the National Head of the Black Angus Association beef registry association. One of the special titles he has. Is there somewhere in the Company that, if I have possible input on somebody that might be sales call, who should I contact? Do you want kind of thing from the stockholders? And if so, who should I contact if I have something like that?

I actually know Mr. Pfeiffer well, and I know his predecessor again, and Kevin Yon who was the former executive at Angus Association. So, I would say that I'm very familiar with them that any positive input you can give with is always helpful.

And then one other question and please take this in the spirit and it intends John. It's been some somewhat unsettling at here in the tranches. The last two quarter calls it was scheduled and then within a matter of a day or two. It was rescheduled and that always generates all kinds of rumors that, oh, oh, there is negative that there have been scramble. Could you give us a little bit of background on why there was rescheduled and then rescheduled so quickly?

Sure, and you’re going to give me another soapbox here to make my point. The underlying reason for both of those are what I would categorize as this movement in all markets and we continued on the daily news towards transparency and understanding the core of all and having documentation and supporting evidence of everything that's happening. So what every time we had to postpone because we continue to get I believe more and more burden as a small public company from regulators. And just you name it from revenue recognition to the way that we’re going to have to account for our leasing this year. I think that's a big, that’s its always just more and more stuff. So our objective and again been very transparent with you, Terry. Our objective from the very beginning has been to report our information as quickly as we possibly can. And those two quarters that we have delayed, we just thought we could get it done quicker than we could. And if there is just more and more work, I can't say it any other way. The burden just continues to get greater and greater. And it's just there is more and more work for us to do as a small public company the way we're reporting, and I will let Dannette a little bit.

Yes, I would also like to suggest as a smaller reporting company, we don’t -- we get good customers service from our service providers yet, we’re not the biggest fish in the ocean. So, we get a push back a little bit, if that makes sense.

Well, I appreciate the insight and hello Dannette, and I guess we will everybody in May and let’s just keep the whip on the horse and keep moving up, appreciate it. Thank you.

And Terry, just to kind of sum that up, I think what we will do is we will make sure that before we make an announcement on the timing we will be more confident that that actually is going to be, if there is really nothing other than that, it's just that it workload, and making sure that we all the stuff done that we need to.

Yes, I think that would be a good move, like I said. Everything is a rumor and that gets generates all kinds of rumors and it's always negative. It's not that, you got good news to deal with that’s why you’re putting it all. I think that would be a good way to do it, way to schedule, sure you got everything lined up. Appreciate it and look forward to seeing you here in a couple of months.

Our next question is from [Sean Con], a private investor. Please proceed.

This is more of a macro question, but I have a question on the Asians swine flu that’s going on. And I know you guys had intentions of expanding into China. What you're thinking is there? And just what that happening with the swine in U.S, any opportunity [indiscernible] represent?

You've got good question. We actually in the short-term don’t have plans to expand into China, actually conducting audits, that’s a whole another level of growth for the Company. So when we address China from a pork perspective, it's actually audits that are being done here and the product is ending up in China as a market for that product, just a small clarification. As it relates to the swine flu, avian influenza, there's at any point over the last 20 years, there's been roughly half of dozen different animals disease issued that we've been dealing with as a company. All of them are unique as for example BSE mad cow was one of the large driving forces for our primary export markets on beef that is not contagious via air travel. So, it's the way that an animal contract that is very different from the way that avian influenza or the swine flu transfer. All that being said, I think I'll answer the macro question in this way, and that is that bio-security in the way that we address the potential vectors associated with these disease traceability requirements is becoming a larger and larger hurdle for competition in our space. So I think this is a very strong part of the mode that we built, that all of our units are very, very focused on bare and buy and security and have been for years we sent the industry standard for that. And what I mean is, the processes and the techniques and the training by which our auditors and our staff that go on site are able to address bio-security issues. So, there's a timeframe for example, in between when you can audit different pork or poultry or dairy locations. And Where Food Comes From again is setting the standard for verification and addressing animal disease concerns. And it's a strong part of our repertoire, and it's something that we've gained a lot of respect for over the years. It is a problem and all of those diseases affect our business, but as we talked about in the past, in many cases which will switch from on site audits to offsite audits, to address some of those disease concerns, specifically when they arise. I am not aware of anything currently that's unique within those two, within your example. That's any different than it was a year ago or five years ago. So, there's nothing new that's happening within that space, that's affecting our business today that hasn't affected it that over long-term.

Our next question is from [Marc Robbins] [ph] with Crown Capital. Please proceed.

I had a couple of questions that I'm going to call you later John. And see if I can't connect with you offline, but congratulations on the year.

Thanks Marc. Actually, you can -- Marc, the Robbins, who's name in the conference Marc that you put on. I'll give you a plug here. Go ahead.

Okay, all right. Yes, the last, last week of September is usually Monday, Tuesday, Wednesday, we've got a just a plain equity conference or companies that I like and it sounds like we're going to get a major sponsor for 2000, our fifth year and, everyone's really invited if you're an investor, serious investors. So, thanks so much for the blog.

You are welcome. And you can just reference I was at that conference. How was that received?

I'm sorry, ask your questions.

How was my presentation at that conference received, at your conference?

Well, I hate to tell you, you got a little collection of private investors that that, that are friends of mine either through the book club that I kind of maintain, started in 1927, I might add or there the network and there is probably about another 30 folks. And I think I should tell everyone, I wrote a book year and a half, two years ago called "Confessions of a Ten-Bagger Junkie" and I use the Where Food Comes From as a ten-bagger potential stock. And I did the entire analysis why I thought I could do up tenfold. So, you're more than well, I'm more than willing to have you buy the book.

Thanks, Marc.

Our next question is from [Mark Grubek] [ph], private investor. Please proceed.

I just want to discuss the SureHarvest a bit. You guys hear me?

Yes.

Yes, regarding SureHarvest in the software side of the business. I was wondering, if you can get some color on the revenue growth and margins?

Yes, the revenue growth, as I mentioned was significant, almost 30%. So, we're very excited about that. We added a few core offerings one of which is so organic, which is a Turbo Tax for organic producers to comply with the NOP requirements. That has required some growth and staffing and as I mentioned, we acquired JVF. So again, we're focused on building shareholder value within the program. So, the individual metrics of SureHarvest and the profitability associated with it, I'm much more focused on the top line growth and how we're able to do that. And we have so many different areas, ID Verify being one of them that I mentioned, where we really needed a high quality the best in the business from developing ag SaaS platforms and that's exactly what ID Verify is, it's a SaaS platform for U.S. beef and pork packers to maintain their compliance, seamlessly in line. And again, when you're dealing with live animals, it's very, very important process that there's less -- the least amount of stress as possible. But it's a core technology and of course as offering and JBF was critical and developing that. So, it continues to -- we're very excited about the growth, but we're not spending a lot of time looking at the individual profitability within those segments.

Our next question is from Ian Cassel, MicroCapClub. Please proceed.

John, I was wondering, if you could maybe give a rather open ended question by design. But can you talk a little bit about progressive beef, maybe the potential of that? And maybe talk a little bit about Wendy's now coming on-board with progressive beef? And is that sort of the tip of the iceberg if you see it? And how that benefits you obviously moving forward?

Yes, great question. Progressive beef has little background is -- has been in existence for close to 20 years. And has 4 or 5 real main components. I listed off food safety, animal welfare, sustainability, and I think one of the most pertinent right now as we look at the large fast food companies and specifically Wendy's is around a concept called responsible use of antibiotics. And the crossover between human use and food animal use of antibiotics and something that the industry has been talking about for probably the last 3 or 4 years, but it continues to become a larger talking point and probably one of the most pronounced ones for company like Wendy's to address when a consumer says how are you dealing with human use antibiotics use us in the food supply. So their response, which we were very, very excited about, as was Tyson's response and I think both of those companies represent what you could call as very progressive in their space and wanting to be proactive and the way that they address these needs. Tyson made a commitment that was spectacular to progressive beef to get 50% of their supply, under the program in the short-term. And that is, that's a very, very unique supply won't give any details on who that is, but it's a group of large progressive cattle feeders, the most well-known in the world that are a part of that. And that are moving forward with the progressive the program. When Wendy's then maybe announcement that they were going to pursued over 50% of their supply that is even more amazing in certain ways because of what that means for the industry and where a lot of that product is eventually going to come from. So yes, I believe…

So it's a follow-up then. So in general, you get, would get your benefit by this in two ways. Number one, you would be going to Tyson in doing some sort of auditing from progressive beef? The number two, being a 10% or 9.9% or whatever it is in progress beef itself, you can get quote group from the revenue that full organization seed as well?

Correct? Yes, you're exactly right. So, it's a very unique and as I -- the reason, I mentioned it being almost 20 years old is that, we get some pushback of times on whether or not we should own a part of a standard as a consulting -- I'm sorry, as a verification and auditing company. Progressive beef had, as I mentioned, had been in existence for close to two decades. We've been the exclusive certifier for years and that was only two certifiers at one point. One of which IMI Global and the other was Validus. So when we acquired Validus, we became the fact of the exclusive certifier. With our investment in progressive beef, it takes it to a new level and we're not that we felt so strongly that it was a very strong program, a program with a lot of integrity and a program that has transparency back through the supply chain and to consumers. That we felt comfortable that we could operate in both those spaces effectively. So you're spot on with how we're going to see that from a financial perspective.

Which side of that would have more potential, auditing or kind of getting flow through income from correct progressive beef?

Another big question. There is a component of progressive beef as I mentioned. It is the most comprehensive program that we deal with. It creates an environment where it's very difficult for smaller producers to comply. So, there is a factor of the auditing business that there's only so many large feed yards in the world or in the United States that would, that could potentially comply with that. But the 80/20 rule definitely applies and those 20% of those feed yards that we work with. We'll probably at the end of the day represent more than 80% of the supply.

Ladies and gentlemen, we have reached the end of our question-and-answer session. I will now turn the call over to John Saunders for closing remarks.

Well, I want to thank everybody for getting on the call today. It looks like we had a great group, a really strong group and great questions everyone. We'll be talking to you here soon in a couple months.

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