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 5, 2020

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.)

202 6th 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))

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 5, 2020 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, 2019.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Press Release issued and dated March 5, 2020
99.2	Transcript for March 5, 2020 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 6, 2020		Dannette Henning
		Chief Financial Officer

EX-99.1

Where Food Comes From, Inc. 8-K

Exhibit 99.1

Where Food Comes From, Inc. Reports 2019 Fourth Quarter and Full Year Financial Results

CASTLE ROCK, Colorado – March 5, 2019 – Where Food Comes From, Inc. (WFCF) (OTCQB: WFCF), the most trusted resource for independent, third-party verification of food production practices in North America, today announced its 2019 fourth quarter and full year financial results.

“Where Food Comes From team members executed at a very high level throughout 2019, and that enabled us to deliver double-digit growth in revenue, gross profit, net income, adjusted EBITDA and operating cash flow – all of which reached record highs in 2019,” said John Saunders, Chairman and CEO. “We closed the year with a strong balance sheet that included cash, cash equivalents and investments of $2.9 million, up 46% year over year, despite having paid $1.0 million in cash to purchase the remaining 40% interest in SureHarvest in the fourth quarter. Working capital at year-end was $3.1 million, up from $2.7 million year over year. We have no long-term debt.

“Where Food Comes From and its business units are the industry leaders in creating and implementing programs that provide transparency in the food supply chain,” Saunders added. “Our portfolio of verification solutions is by far the largest and most comprehensive in the world, supporting more than 15,000 customers and covering virtually all food commodities and 40-plus verification standards. We are continually adding new programs and services and recently launched our CARE suite of sustainability standards covering beef, poultry and dairy.”

Saunders added, “On March 4, 2020, we announced our entry into the seafood space with the acquisition of Postelsia Holdings, a Canada-based provider of environmental and social sustainability programs for the seafood industry. In addition to rounding out our solutions portfolio, Postelsia strengthens our leadership position in the protein space and extends our geographical reach into Asia. Going forward, we will continue to manage our business to emphasize innovation and diversity in our solutions portfolio, superior customer service, and value creation for our shareholders and other stakeholders.”

Fourth Quarter Results – 2019 vs. 2018

Revenue in the fourth quarter of 2019 increased 23% to $5.7 million from $4.6 million in the same quarter last year. Revenue mix included:

● Verification and certification services, up 20% to $4.3 million from $3.5 million.

● Product revenue, up 48% to $938,000 from $633,000.

● Software license, maintenance, and support (including intercompany sales*), up 30% to $305,000 from $234,000. Software license, maintenance and support (excluding intercompany sales*) up 5% to $245,000 from $234,000.

● Software-related consulting services (including intercompany sales*), up 31% to $287,000 from $220,000. Software-related consulting services (excluding intercompany sales*), up 21% to $266,000 from $220,000.

*(Under segment accounting rules, the Company must reflect the impact of intercompany sales in its software sales and consulting revenue segment. Intercompany sales include the provision by the Company’s SureHarvest subsidiary of software and services to Where Food Comes From, Inc. to support Company-wide technology initiatives not directly related to SureHarvest. For more information, refer to the Results of Operations section of the Company’s Form 10-K.)

Gross profit in the fourth quarter (excluding intercompany sales*) increased 55% year over year to $2.7 million from $1.8 million. Gross margin increased to 48.1% from 38.2% year over year due primarily to two anomalous factors: lower bonus accrual and the acceleration of GAP audits in the fourth quarter.

Selling, general and administrative expense increased 21% in the fourth quarter to $1.9 million from $1.6 million in the same quarter last year due to increased depreciation expense, as well as higher headcount, public company costs and professional fees.

Operating income increased 342% in the fourth quarter to $836,000 from $189,000 in the same quarter last year.

Net income attributable to Where Food Comes From, Inc. in the fourth quarter increased 178% to $586,000, or $0.02 per share, from net income of $211,000, or $0.01 per share, in the same quarter last year.

Adjusted EBITDA in the fourth quarter increased 151% to $1.3 million from $522,000 in the same quarter last year.

Full Year Results – 2019 vs. 2018

Total revenue for the year ended December 31, 2019, increased 17% to $20.8 million from $17.8 million in the prior year. Revenue mix included:

● Verification and certification services, up 13% to $15.6 million from $13.7 million.

● Product revenue, up 46% to $3.3 million from $2.3 million.

● Software license, maintenance, and support (including intercompany sales*), up 28% to $1.3 million from $993,000. Software license, maintenance and support revenue (excluding intercompany sales*) was $1.1 million, up 7% from $993,000.

● Software-related consulting services (including intercompany sales*), up 18% to $948,000 from $800,000. Software-related consulting services (excluding intercompany sales*), up 5% to $843,000 from $800,000.

Gross profit for the full year (excluding intercompany sales*) increased 17% to $9.1 million from $7.7 million. Gross margin increased slightly to 43.7% from 43.5%. Gross margins benefitted from increased efficiencies and streamlining of costs of salaries, benefits, insurance and taxes related to two 2018 acquisitions, partially offset by lower product margins due to competitive pricing programs for volume ear tag customers.

Selling, general and administrative expense increased 10% year over year to $7.5 million from $6.9 million due to higher headcount and staff training programs, increased public company compliance costs and professional fees related to implementing new accounting standards, higher depreciation and amortization, and increased fixed costs related to two acquisitions in 2018.

Operating income increased 78% year over year to $1.6 million from $875,000.

Net income attributable to Where Food Comes From, Inc. increased 68% year over year to $1.3 million, or $0.05 per share, from $801,000, or $0.03 per share, in the prior year.

Adjusted EBITDA increased 40% year over year to $3.3 million from $2.3 million.

The Company generated $2.9 million in net cash from operations in 2019, up 149% from $1.2 million in the prior year.

The cash, cash equivalents, and short- and long-term investments balance at December 31, 2019, increased 46% to $2.9 million from $2.0 million at 2018 year-end. The Company had $3.1 million in working capital at December 31, 2019, up from $2.7 million at 2018 year-end.

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: 13699267

Phone replay: 

A telephone replay of the conference call will be available through March 19, 2020, as follows: 

Domestic Toll Free: 1-877-660-6853 

International: 1-201-612-7415 

Conference Code: 13699267

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 supports more than 15,000 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, International Certification Services, Validus Verification Services, SureHarvest, A Bee Organic and Sterling Solutions 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 and demand for, and impact and efficacy of, the Company’s products and services on the marketplace; ability to continue posting positive financial results; expectations to extend the Company’s track record of profitable growth; and ability to continue introducing and advancing verification standards 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 full year 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.
303-880-9000

Where Food Comes From, Inc.
Statements of Income

	Three months ended December 31,						Year ended December 31,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)
Revenues:
Verification and certification service revenue	$	4,250,093		$	3,532,364		$	15,564,411		$	13,743,311
Product sales		938,136			633,262			3,300,799			2,266,771
Software license, maintenance and support services revenue		244,764			233,860			1,066,543			993,161
Software-related consulting service revenue		266,142			219,585			842,663			800,316
Total revenues		5,699,135			4,619,071			20,774,416			17,803,559
Costs of revenues:
Costs of verification and certification services		2,111,745			2,165,320			8,444,309			7,564,946
Costs of products		610,727			403,554			2,148,564			1,438,648
Costs of software license, maintenance and support services		146,183			154,859			615,248			644,746
Costs of software-related consulting services		92,220			131,158			486,880			411,468
Total costs of revenues		2,960,875			2,854,891			11,695,001			10,059,808
Gross profit		2,738,260			1,764,180			9,079,415			7,743,751
Selling, general and administrative expenses		1,902,485			1,575,237			7,527,044			6,869,198
Income from operations		835,775			188,943			1,552,371			874,553
Other expense (income):
Dividend income from Progressive Beef		(30,000	)		—			(120,000	)		(100,000	)
Other income, net		(1,015	)		(2,714	)		(9,330	)		(14,270	)
Gain on sale of assets		(8,326	)		—			(9,326	)		—
Impairment of goodwill		198,000			—			198,000			—
Interest expense		1,289			1,082			10,057			4,837
Income before income taxes		675,827			190,575			1,482,970			983,986
Income tax expense		229,910			52,008			460,000			309,008
Net income		445,917			138,567			1,022,970			674,978
Net loss attributable to non-controlling interest		140,366			72,497			322,195			125,758
Net income attributable to Where Food Comes From, Inc.	$	586,283		$	211,064		$	1,345,165		$	800,736
Per share - net income attributable to Where Food Comes From, Inc.:
Basic	$	0.02		$	0.01		$	0.05		$	0.03
Diluted	$	0.02		$	0.01		$	0.05		$	0.03
Weighted average number of common shares outstanding:
Basic		24,764,621			25,032,068			24,850,409			24,825,933
Diluted		24,923,788			25,149,970			25,027,247			24,989,457

Where Food Comes From, Inc.
Calculation of Adjusted EBITDA*
(Unaudited)

	Three months ended December 31,				Year ended December 31,
	2019		2018		2019		2018
Net income attributable to Where Food Comes From, Inc.	$	586,283	$	211,064	$	1,345,165	$	800,736
Adjustments to EBITDA:
Interest expense		1,289		1,082		10,057		4,837
Income tax expense		229,910		52,008		460,000		309,008
Depreciation and amortization		257,188		199,638		1,096,460		942,418
EBITDA*		1,074,670		463,792		2,911,682		2,056,999
Adjustments:
Impairment of goodwill		198,000		—		198,000		—
Stock-based compensation		36,672		35,889		162,405		161,128
Cost of acquisitions		—		22,330		—		119,397
ADJUSTED EBITDA*	$	1,309,342	$	522,011	$	3,272,087	$	2,337,524

*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

	December 31,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	2,637,665		$	1,482,391
Accounts receivable, net of allowance		2,515,244			2,205,162
Short-term investments in certificates of deposit		258,097			245,597
Prepaid expenses and other current assets		450,346			439,424
Total current assets		5,861,352			4,372,574
Property and equipment, net		1,545,294			1,675,472
Right-of-use assets		3,268,343			—
Long-term investments in certificates of deposit		—			252,999
Investment in Progressive Beef		991,115			991,115
Intangible and other assets, net		3,247,695			3,852,121
Goodwill		2,945,734			3,143,734
Deferred tax assets, net		377,928			175,923
Total assets	$	18,237,461		$	14,463,938
Liabilities and Equity
Current liabilities:
Accounts payable	$	1,022,835		$	533,925
Accrued expenses and other current liabilities		673,768			492,601
Deferred revenue		797,033			654,872
Current portion of notes payable		—			10,173
Current portion of finance lease obligations		8,317			11,309
Current portion of operating lease obligations		239,519			—
Total current liabilities		2,741,472			1,702,880
Notes payable, net of current portion		—			32,220
Finance lease obligations, net of current portion		21,405			32,747
Operating lease obligation, net of current portion		3,525,462			—
Deferred rent liability		—			119,187
Lease incentive obligation		—			362,088
Total liabilities		6,288,339			2,249,122
Commitments and contingencies
Contingently redeemable non-controlling interest		—			1,449,007
Equity:
Common stock		25,802			25,473
Additional paid-in-capital		11,424,512			11,031,264
Treasury stock		(1,664,490	)		(1,109,061	)
Retained earnings		2,163,298			818,133
Total equity		11,949,122			10,765,809
Total liabilities and stockholders’ equity	$	18,237,461		$	14,463,938

EX-99.2

Where Food Comes From, Inc. 8-K

Exhibit 99.2

WFCF

2019 Fourth Quarter and Full Year Conference Call Script

Call date: Thursday, March 5, 2020

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

Jay

Good morning and welcome to the Where Food Comes From 2019 fourth quarter and year-end earnings call.

Joining me on the call today are John Saunders, CEO; Leann Saunders, President, 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 will also be discussing EBITDA and Adjusted EBITDA, which are non-GAAP financial measures provided as a complement to the results provided in accordance with GAAP principles. We use and believe investors benefit from the presentation of EBITDA and Adjusted EBITDA in evaluating our operating performance because it 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.

John

Good morning and thanks for joining the call.

This morning we issued our 2019 earnings release and it occurred to me that it’s been a dozen years since we did this for the very first time as a public company. Back in 2007, we had a small fraction of the number of shareholders we have today. Many of them were not only original seed investors but they also were our customers as well. Today, I’m happy to say that many of them still own our stock – and in fact a few of them are among our four or five largest individual stockholders. I’m sure several of these investors are listening in on this call today. It’s extremely gratifying to that these individuals not only bought into our original vision for the company but continue to support us as both customers and shareholders to this day. Their confidence in what we are doing means a lot to us.

As noted in our press release this morning, we had a very strong year in terms of financial results. Revenue, gross profit, net income, EPS, and adjusted EBITDA all reached record levels.

We attribute this to terrific employees across all of our business units who consistently perform at a very high level and who have helped us capitalize on broad consumer and industry trends that drive what we do on a daily basis.

A few financial highlights, beginning with the fourth quarter:

● Revenue increased 23% to $5.7 million from $4.6 million, reflecting good demand across our broad range of offerings.

● Gross margin increased to 48% from 38%. This big jump stemmed from a couple of anomalous factors, including lower bonus accrual and the acceleration of beef audits in the fourth quarter.

● Net income attributable to WFCF rose 178% to $586,000 from $211,000.

● EPS doubled to 2 cents.

● And adjusted EBITDA increased 151% to $1.3 million from $522,000.

For the full year:

● Revenue grew 17% to $20.8 million from $17.8 million, again reflecting good demand for a variety of verification services and particularly our dominance in the protein space.

● Gross margin increased to 43.7% from 43.5%, benefitting from improved efficiencies partially offset by lower product margins due to competitive pricing programs for volume ear tag customers.

● Net income attributable to WFCF rose 68% to $1.3 million from $801,000.

● EPS increased to 5 cents from 3 cents.

● And adjusted EBITDA grew 40% to $3.3 million from $2.3 million

For the full year we generated cash from operations of $2.9 million, up 149% year over year from $1.2 million.

We have a very solid balance sheet. In the fourth quarter we spent $1.0 million in cash to buy the remaining 40% interest in SureHarvest. Nevertheless, we closed the year with cash, cash equivalents and investments of $2.9 million, up 46% year over year. At December 31^st we had $3.1 million in working capital and we have no long-term debt.

Turning to revenue mix, we achieved year-over-year growth in all four revenue segments for both the fourth quarter and full year.

● Verification and certification services – which comprise the majority of our revenue – grew 20% in the fourth quarter and 13% for the full year. These increases were attributable in part to continued strength in Chinese demand for US beef. As I mentioned earlier, we also continue to experience growing demand for verification to a variety of other standards.

● Based on higher verification activity, our product revenue – comprised of RFID ear tags – grew 48% in Q4 and 46% in the full year.

● Software license, maintenance and support revenue, inclusive of inter-company sales, grew 30% in the fourth quarter and 28% for the full year.

● And software consulting revenue, inclusive of inter-company sales, grew 31% and 18%, respectively for the fourth quarter and full year.

As you’re probably aware, a key component of our business strategy is to build and maintain the industry’s most complete services portfolio so that when a producer, processor, distributor or retailer decides to get interested in a particular verification standard, the road will almost certainly lead to WFCF or one of our business units us as a potential provider. Today we offer more than 40 verification services – far and away the largest service portfolio in our space. So, while we are positioning ourselves as a one-stop-shop for customers up and down the food supply chain – with the added competitive advantage of services bundling – we believe we are building a moat around our company that will serve our shareholders well over the long term.

In 2019, we added two new programs to our portfolio. The first was Black Angus Verified Beef, a new verification program designed to reassure cattle buyers and beef consumers that the claims producers and marketers make about Black Angus beef are authentic. Black Angus Verified Beef is a sub-program of Breed Verified, IMI Global’s newly approved USDA Process Verified Program. We estimate that half of all US cattle ranchers produce Black Angus beef, so the addressable market is sizable. This new program further strengthens our domestic leadership position in beef.

The second new program launched in 2019 was the Gluten Free by WFCF standard. This was essentially new branding to replace the Gluten Free standard formerly administered by our ICS business unit. We decided to bring it under the WFCF umbrella and re-launch it following a surge in consumer demand for gluten-free products. That demand was spurred at least in part by a study released showing a high percentage of gluten-free product labeled restaurant food in fact DID contain gluten. The updated standard includes more stringent requirements that are necessary to reassure CPG makers as well as restaurants and their customers that ingredients in grain-based products and menu items have been thoroughly vetted. We think this is another large addressable market for us as demand for gluten-free products in the US is estimated at $2.7 billion annually with expectations that will double by 2025.

More recently we rolled out the WFCF CARE program – a suite of sustainability solutions designed to address growing consumer demand for sustainably produced products. Since the first of the year we’ve introduced the new BeefCARE, DairyCARE and PoultryCARE programs. We’re excited about these programs because sustainability is one of the fastest growing consumer trends in the food space, and we think there’s a lot of potential to drive revenue growth and further value for our customers and WFCF.

The genesis of our CARE programs is interesting. When the Whole Foods made the decision last quarter to go with a single provider to conduct GAP audits, it really cleared the way for us to do something we had been precluded from doing for years due to competitive reasons. With that roadblock out of the way, we quickly moved to create our own suite of sustainability offerings under the CARE brand. All three programs address animal husbandry, worker welfare and environmental stewardship – and we think they are going to be very attractive to current and prospective customers.

It’s difficult to quantify the addressable market for us in sustainability, but based on the undeniable consumer trend and the response of influential retailers eager to capitalize on this trend, we believe it is significant. We mentioned last quarter that we were engaged with a major retailer that asked us to create a sustainability program that will be more attractive to producers, feed yards and packers in the beef space. That process is continuing, and in the meantime we have engaged with a second large retailer in a similar process. Although there is no guarantee that these relationships will bear fruit, we are encouraged that Where Food Comes From was selected to explore these opportunities.

And speaking of expanding our services portfolio, earlier this week we announced the purchase of Postelsia Holdings Ltd., a leader in the emerging field of environmental and social sustainability programs for the seafood industry. We’ve been talking about getting into seafood for a while because it was the only major food sector where we didn’t have a presence, so we are pleased that we were able to conclude an agreement with Postelsia. This acquisition both strengthens our leadership position in the protein space and extends our geographical reach.

Postelsia provides a range of programs and consulting services that improve and promote inclusive sustainability practices in seafood supply chains. The idea is to manage risks to buyers associated with environmental impact and worker abuse and to help maximize value for the producers themselves. Postelsia’s customers include producers, retailers, consumers, and restaurants. As a example, the Company advises the James Beard Foundation Smart Catch program, an educational sustainable seafood initiative created by chefs for chefs with the purpose of increasing the sustainability of the seafood supply chain.

Postelsia was an early innovator in the space and is leading a variety of important initiatives, with a particular emphasis on the shrimp industry. Our goal is to help Postelsia expand its customer base and build out sustainability programs around the world.

Before I open up the call to questions, I want to make a few comments regarding the Coronavirus situation. Without question, this virus is having an impact on the beef industry in general as food service activity (restaurants and stores) and tourism and port activity is way down in China and, to a lesser extent, in Europe. I saw a Rabobank note earlier this week that said the impact in China could stretch into April and May. However, the note went on to say that, despite lower beef demand in the first half of this year, the bank expects China beef imports for the full year 2020 is actually expected to grow.

It’s important to keep in mind that a projected short-term decline in beef demand from Chinese and EU markets does not necessarily directly impact our business. Remember, the source verification services that we provide begin on the day a calf is born and it takes more than two years before that animal is processed and the end products are ready to ship overseas. So, for example, a cattle ranch today that decides to STOP source verifying its calves would effectively be betting that the virus will still be raging two years from now when the ranch’s product would be ready to ship. Not counting the media, which almost seems to be rooting for the worst case scenario, I think the prevailing opinion is that the virus will be under control in a reasonable time frame. Certainly, that seems to be the opinion of our producers.

If nothing else, the Coronavirus has underscored how fast a disease outbreak can disrupt global economies and impact billions of people around the world. In our view, this phenomenon reinforces the importance of traceability in the food supply chain – and that bodes well for Where Food Comes From over the long term. As a reminder, the U.S. is the only developed country and major food exporter that does not have mandatory traceability in the beef supply chain. That’s just food for thought.

So, in summary, 2019 was highlighted by strong financial results and continued success positioning WFCF as the leader in creating and implementing programs that provide transparency in the food supply chain. Our world class solutions portfolio – by the far the industry’s largest and most diverse – creates a strategic moat around our business that we believe translates into value for all of our stakeholders.

And with that, I’ll open the call to questions. Operator…

Question and Answer Session:

Our first question is from Alex Team, First Ballantyne. Please proceed with your question.

Question 1: Alex Team

Along the line of the coronavirus, do you see continued demand increases due to the wildlife bans?

John Saunders 

That’s an interesting question. I think, yes. I do think there’s an opportunity for a more robust approach to the protein sources that we’re able to produce here. Just purely based on the fact that there aren’t -- there isn’t as much food and the concern over the wild animals that were being consumed. I really am not an expert in that field, so that’s just kind of a guess. But, yes, it would seem to lend itself for a stronger focus on more consistent and hopefully more reliable sources of protein.

Alex Team 

Okay. And then about your new acquisition that was just announced today, just to verify that’s on sustainability and not verification of the types of seafood that are being monitored/

John Saunders 

Again, great question. Yes, Postelsia has a wide range of services that they offer to a broad range of seafood products. But the real primary focus is on shrimp to start. So we do see both activities involved there. So it will be consulting and traceability, but also the verification of those attributes and where those products are produced.

Alex Team 

And was that paid with cash on hand or did you draw down on a credit facility?

John Saunders 

Nope. That was just cash on hand. It was purely cash. No stock.

Alex Team 

Okay. Thanks guys. I’ll jump back in the queue if I have more questions.

Operator 

Our next question is from Private Investor. Please proceed with your question.

Question 2: Unidentified Analyst 

Yes. Good morning. Congratulations on all that you’ve done over the years. It’s really remarkable. Just a few questions. First of all about the Postelsia. I take it that you’re not releasing, what the cost of that acquisition was and then related to acquisitions overall, do you feel like we’re done for a while given that we have the whole assortment of offerings or do you feel like there’s more areas where we would need to do an acquisition?

John Saunders 

Yes. Great question. I do believe we’re going to report the financials. I’m going to ask a question, Dannette is that accurate?

Dannette Henning 

Yes. There would be some more information in our Form 10-K that is filed later today.

Unidentified Analyst 

Okay.

John Saunders 

And then, the second question. No, it does not complete our acquisition strategy. We see that there’s always opportunities for us to reinforce our position in those specific industries. And as I’ve mentioned several times over the past, when we initially started our acquisition strategy, we had more than three dozen companies that we identified and many more have come to light since then. So we’ll continue on a lot of the factors that go into the acquisition strategy really are based on the timing of those -- how those relationships evolve over time. And we’ve still got several in the queue.

Unidentified Analyst 

That’s good. And so regarding the supermarkets that you’re pitching to or maybe fast food chains given that we’re sort of the dominant player and presuming they have ongoing interest, who would we lose to? I mean, who’s sort of second and third in line after Where Food Comes From?

John Saunders  

Great question. Really, there aren’t a lot of alternatives out there. I think as I mentioned, our scenario that changed last year with Whole Foods has really put us in unique position to approach retailers in a much different way than we have in the past. And our new care program, which again is addressing sustainability in a more specific way, in a more defined way. And what I mean by that is that, a lot of people talk about sustainability, but it’s very -- as we talk to retailers and we talk to brands, it’s very clear that maybe depending on the generation of the people that we’re talking to, are there specific market that they’re in. 

Sustainability means a lot of different things. So one of the critical aspects of care was our ability to really define what we meant by sustainability. And animal husbandry, environmental stewardship and then the people in community that are working around and with that specific producer where the key pillars of that -- of what we thought sustainability really meant. And where we’ve been very encouraged by the initial response to that and just having a definition of how it was going to be communicated directly to consumers.

So again, we’ve only -- this has only been about a two month process so far. So the initial results have been really, really encouraging. And as far as I know, I don’t see another competitor out there that’s doing it in the same way.

Unidentified Analyst 

That’s great. And then just one more question about China. So with all that’s happened there, I feel like they should be called where food shouldn’t come from. It’s scary considering the open meat markets and the bats and the civic cats and the food chain, which is just disturbing and sort of more stuff comes to light as time goes on. Putting aside for a second, the beef issues and the delays and also the trade war, isn’t there just a giant opportunity in China to have proteins, which they’re always short on coming in from the U.S. where they do understand the verification and where all these products come from. And are you seeing interest or is it just too crazy in China right now? And maybe they’re not reaching out to you, but don’t you see like a huge opportunity in the long-term there?

John Saunders 

Yes. I mean, my last comment about the coronavirus, I think what it’s done most specifically for us internally and I think within our sphere of influence here with the protein producers that we’re engaged with is, there’s more of a need for a traceability system than ever before because of this uncertainty, the market swings on a daily basis. And the confusion around what it means. It just highlights that having a consistent safe source of protein is critically important for a population definitely as large as China, but all around the world, I think it’s highlighted how important it is.

So, yes, I think the big message that we’re trying to convey is that there could be short-term slopes and kind of fits and starts and we’re seeing a little bit of that. But the long-term opportunity related to coronavirus is enormous. And I think it’s something that we’re very, very keen to help promote our producers, our brands, the companies that we work with today and their ability to assure Chinese consumers and consumers all over the world around what a great source of protein we have here in the United States.

Unidentified Analyst

That’s awesome. And I’ll take myself out of the queue, but at some point, I hope you talk about the opportunity in [hemp] as well. Thanks for the color.

Operator

We have reached the end of the question-and-answer session; I will now turn the call back over to John Saunders for closing remarks.

John Saunders

Well, thanks again everybody for the call for the time today. We’re very excited about 2020 and I look forward to talking to you here in a couple months. Have a great day.

Operator

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