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Table of Contents


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

         


FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the quarterly period ended March 31, 2022
   
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from __________ to __________

 

Commission File Number 001-36245

RiceBran Technologies

(Exact Name of Registrant as Specified in its Charter)

 

California

(State or other jurisdiction of

incorporation or organization)

87-0673375

(I.R.S. Employer Identification No.)

25420 Kuykendahl Rd., Suite B300

Tomball, TX

 (Address of Principal Executive Offices) 

77375

(Zip Code)

(281) 675-2421

(Registrant’s telephone number, including area code)

 

None

(Former name, former address and former fiscal year, if changed since last report

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading symbol

 

Name of each exchange on which registered

Common Stock, no par value per share

 

RIBT

 

The NASDAQ Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒
      Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule l2b-2 of the Exchange Act). Yes ☐ No ☒

 

As of April 26, 2022, there were 51,820,425 shares of common stock outstanding.

 

 

 

 

RiceBran Technologies

Index

Form 10-Q

 

PART I. FINANCIAL INFORMATION

Page

 

Item 1.

Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021

 
   

Condensed Consolidated Balance Sheets as of March 31, 2022, and December 31, 2021

 
   

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

 
   

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

16

 

Item 4.

Controls and Procedures

16

PART II. OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

         16

 

Item 1A.

Risk Factors

16

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

17

 

Item 3.

Defaults Upon Senior Securities

17

 

Item 4.

Mine Safety Disclosures

17

 

Item 5.

Other Information

17

 

Item 6.

Exhibits

18

Signatures

          19

 

Cautionary Note about Forward-Looking Statements

 

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue, liquidity or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services, products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. The forward-looking statements contained herein reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Actual results may differ materially from those projected in such forward-looking statements due to a number of factors, risks and uncertainties, including the factors that may affect future results set forth in this quarterly report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this quarterly report.

 

Unless the context requires otherwise, references to “we,” “us,” “our” and “the Company” refer to RiceBran Technologies and its consolidated subsidiaries.

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

RiceBran Technologies

Condensed Consolidated Statements of Operations

(Unaudited) (in thousands, except share and per share amounts)

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 
                 

Revenues

  $ 10,559     $ 8,605  

Cost of goods sold

    10,057       7,933  

Gross profit

    502       672  

Selling, general and administrative expenses

    1,692       1,741  

Loss on disposition of property and equipment

    -       7  

Operating loss

    (1,190 )     (1,076 )

Interest income

    1       1  

Interest expense

    (126 )     (112 )

Change in fair value of derivative warrant liability

    (171 )     -  

Gain on extinguishment of PPP loan

    -       1,792  

Other expense

    (34 )     (13 )

Other income

    4       -  

Income (loss) before income taxes

    (1,516 )     592  

Income tax benefit

    -       (1 )

Net income (loss)

  $ (1,516 )   $ 591  
                 

Earnings (loss) per common share:

               

Basic

  $ (0.03 )   $ 0.01  

Diluted

  $ (0.03 )   $ 0.01  
                 

Weighted average number of shares outstanding:

               

Basic

    52,529,964       45,635,185  

Diluted

    52,529,964       46,556,247  

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

RiceBran Technologies

Condensed Consolidated Balance Sheets

(Unaudited) (in thousands, except share amounts)

 

   

March 31,

   

December 31,

 
   

2022

   

2021

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 5,868     $ 5,825  

Accounts receivable, net of allowance for doubtful accounts of $20 and $18

    4,629       4,136  

Inventories

    2,482       2,444  

Other current assets

    952       810  
Total current assets     13,931       13,215  

Property and equipment, net

    14,887       15,444  

Operating lease right-of-use assets

    2,043       2,127  

Intangible assets

    484       527  
Total assets   $ 31,345     $ 31,313  
                 

LIABILITIES AND SHAREHOLDERS' EQUITY

               

Current liabilities:

               

Accounts payable

  $ 1,672     $ 826  

Commodities payable

    2,291       1,702  

Accrued salary, wages and benefits

    875       787  

Accrued expenses

    522       683  

Operating lease liabilities, current portion

    396       382  

Due under insurance premium finance agreements

    283       128  

Due under factoring agreement

    3,438       3,379  

Finance lease liabilities, current portion

    82       86  

Long-term debt, current portion

    1,217       1,183  
Total current liabilities     10,776       9,156  

Operating lease liabilities, less current portion

    1,794       1,948  

Finance lease liabilities, less current portion

    86       100  

Long-term debt, less current portion

    1,035       1,356  

Derivative warrant liability

    429       258  
Total liabilities     14,120       12,818  

Commitments and contingencies

                 

Shareholders' equity:

               
Preferred stock, 20,000,000 shares authorized: Series G, convertible, 3,000 shares authorized, stated value $150150 shares, issued and outstanding     75       75  
Common stock, no par value, 150,000,000 shares authorized, 51,820,425 shares and 51,589,674 shares, issued and outstanding     326,525       326,279  

Accumulated deficit

    (309,375 )     (307,859 )
Total shareholders' equity     17,225       18,495  
Total liabilities and shareholders' equity   $ 31,345     $ 31,313  

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

RiceBran Technologies

Condensed Consolidated Statements of Cash Flows

(Unaudited) (in thousands)

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 

Cash flow from operating activities:

               

Net income (loss)

  $ (1,516 )   $ 591  

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

         

Depreciation

    516       612  

Amortization

    43       53  

Stock and share-based compensation

    246       253  

Change in fair value of derivative warrant liability

    171       -  

Gain on extinguishment of PPP loan

    -       (1,792 )

Other

    (48 )     (18 )

Changes in operating assets and liabilities:

               

Accounts receivable

    (493 )     (808 )

Inventories

    (39 )     384  

Accounts payable and accrued expenses

    884       508  

Commodities payable

    589       556  

Other

    (163 )     (340 )

Net cash provided by (used in) operating activities

    190       (1 )

Cash flows from investing activities:

               

Purchases of property and equipment

    (157 )     (325 )

Proceeds from insurance on involuntary conversion

    109       -  

Net cash used in investing activities

    (48 )     (325 )

Cash flows from financing activities:

               

Advances on factoring agreement

    8,856       7,407  

Payments on factoring agreement

    (8,797 )     (6,883 )

Advances on insurance premium finance agreements

    374       279  

Payments on insurance premium finance agreements

    (219 )     (157 )

Payments of debt and finance lease liabilities

    (313 )     (165 )

Net cash provided by (used in) financing activities

    (99 )     481  

Net change in cash and cash equivalents

  $ 43     $ 155  
                 

Cash and cash equivalents, beginning of period

    5,825       5,263  

Cash and cash equivalents, end of period

    5,868       5,418  

Net change in cash and cash equivalents

  $ 43     $ 155  
                 

Supplemental disclosures:

               

Cash paid for interest

  $ 118     $ 85  

Cash paid for income taxes

  $ -     $ 1  

 

See Notes to Unaudited Condensed Consolidated Financial Statements

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

NOTE 1. BASIS OF PRESENTATION

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements (interim financial statements) of RiceBran Technologies and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the Securities and Exchange Commission (the SEC) for reporting on Form 10-Q; therefore, they do not include all of the information and notes required by GAAP for complete financial statements. The interim financial statements contain all adjustments necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented of a normal and recurring nature necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented.

 

These interim financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021, which included all disclosures required by generally accepted accounting principles.

 

The results reported in these interim financial statements are not necessarily indicative of the results to be expected for the full fiscal year, or any other future period, and have been prepared based on the realization of assets and the satisfaction of liabilities in the normal course of business. 

 

 

NOTE 2. BUSINESS

 

We are a specialty ingredient company focused on the development, production, and marketing of products derived from traditional and ancient small grains. We create and produce products utilizing proprietary processes to deliver improved nutrition, ease of use, and extended shelf-life, while addressing consumer demand for all natural, non-GMO and organic products. We believe our products can become valuable alternatives to traditional food ingredients.

 

Notably, we apply our proprietary technologies to convert raw rice bran into stabilized rice bran (SRB), and high value-added derivative products including: RiBalance, a rice bran nutritional package derived from SRB; RiSolubles, a nutritious, carbohydrate and lipid rich fraction of RiBalance; RiFiber, a fiber rich insoluble derivative of RiBalance and ProRyza, a rice bran protein-based product; and a variety of other valuable derivatives extracted from these core products.

 

In granular form, SRB is a food additive used in products for human and animal consumption. We believe SRB has certain qualities that make it more attractive than additives based on the by-products of other agricultural commodities, such as corn, soybeans, wheat, and yeast. Our SRB products and SRB derivatives support the production of healthy, natural, hypoallergenic, gluten free, and non-genetically modified ingredients and supplements for use in meats, baked goods, cereals, coatings, health foods, and high-end animal nutrition. Our target customers are food and animal nutrition manufacturers, wholesalers and retailers, both domestically and internationally.

 

We manufacture and distribute SRB from four locations: two facilities located within supplier-owned rice mills in Arbuckle and West Sacramento, California; one company-owned facility in Mermentau, Louisiana; and our own rice mill in Wynne, Arkansas. At our Dillon, Montana facility, we produce SRB-based products and derivatives through proprietary processes. Our rice mill in Wynne, Arkansas also supplies grades U.S. No. 1 and No. 2 premium long and medium white rice, and our grain processing facility in East Grand Forks, Minnesota, mills a variety of traditional, and ancient, small grains. Given the integrated nature of these facilities, we have one reporting unit and one operating segment, specialty ingredients.

 

 

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Recent accounting standards not yet adopted

 

The following discusses the accounting standard(s) not yet adopted that will, or are expected to, result in a significant change in practice and/or have a significant financial impact on our financial position, results of operations or cash flows.

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

In June 2016, the Financial Accounting Standards Board (FASB) issued guidance ASU No. 2016-13 Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which changes the accounting for credit losses for certain instruments, including trade receivables, from an incurred loss method to a current expected loss method. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The guidance, and subsequent guidance related to the topic, is effective for our annual and interim periods beginning in 2023 and must be adopted on a modified retrospective approach through cumulative-effect adjustment to retained earnings as of January 1, 2023. Based on the nature of our current receivables and our credit loss history, we do not expect the adoption of the guidance to have a significant impact on our results of operations, financial position, or cash flows.

 

 

NOTE 4. CASH AND CASH EQUIVALENTS

 

As of March 31, 2022, we have $3.8 million of cash and cash equivalents invested in a money market fund with net assets invested in U.S. Dollar denominated money market securities of domestic and foreign issuers, U.S. Government securities and repurchase agreements. We consider all liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

 

We have cash on deposit in excess of federally insured limits at a bank. We do not believe that maintaining substantially all such assets with the bank or investing in a liquid mutual fund represent material risks.

 

 

NOTE 5. ACCOUNTS RECEIVABLE AND REVENUES

 

Amounts billed and due from our customers are classified as accounts receivable on our consolidated balance sheets and require payment on a short-term basis. Invoices are generally issued at the point control transfers and substantially all of our invoices are due within 30 days or less, however certain customers have terms of up to 120 days. For substantially all of our contracts, control of the ordered product(s) transfers at our location. Periodically, we require payment prior to the point in time we recognize revenue. Amounts received from customers prior to revenue recognition on a contract are contract liabilities, are classified as customer prepayments liability on our consolidated balance sheets and are typically applied to an invoice within 30 days of the prepayment. Revenues in the three months ended March 31, 2022 and 2021, include $0.1 million, or less, in unearned revenue as of the end of the prior year.

 

Our accounts receivable potentially subject us to significant concentrations of credit risk. Revenues and accounts receivable from significant customers (customers with revenue or accounts receivable in excess of 10% of consolidated totals) are stated below as a percent of consolidated totals.

 

   

Customer

 
   

A

   

B

 

% of revenue, three months ended March 31, 2022

    11 %     11 %

% of revenue, three months ended March 31, 2021

    5 %     10 %
                 

% of accounts receivable, as of March 31, 2022

    4 %     18 %

% of accounts receivable, as of December 31, 2021

    15 %     8 %

 

The following table presents revenues by geographic area shipped to (in thousands).

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 

United States

  $ 10,246     $ 8,196  

Other countries

    313       409  

Revenues

  $ 10,559     $ 8,605  

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

NOTE 6. INVENTORIES

 

The following table details the components of inventories (in thousands).

 

   

March 31,

   

December 31,

 
   

2022

   

2021

 

Finished goods

  $ 1,728     $ 1,679  

Raw materials

    637       599  

Packaging

    117       166  

Inventories

  $ 2,482     $ 2,444  

 

 

NOTE 7. PROPERTY AND EQUIPMENT

 

The following table details the components of property and equipment (amounts in thousands).

 

   

March 31,

   

December 31,

         
   

2022

   

2021

   

Estimated Useful Lives

Land

  $ 730     $ 730          

Furniture and fixtures

    265       265     5 -

10 years

Plant

    10,554       10,457     20 -

40 years, or life of lease

Computer and software

    452       452     3 -

5 years

Leasehold improvements

    1,828       1,828     4 -

15 years, or life of lease

Machinery and equipment

    14,977       15,115     5 -

15 years

Property and equipment, cost

    28,806       28,847          

Less accumulated depreciation

    13,919       13,403          

Property and equipment, net

  $ 14,887     $ 15,444          

 

Amounts payable for property and equipment included in accounts payable totaled less than $0.1 million at March 31, 2022, and $0.2 million at December 31, 2021. Assets which had not yet been placed in service, included in property and equipment, totaled $0.8 million at March 31, 2022, and $0.9 million at December 31, 2021.

 

 

NOTE 8. LEASES

 

The components of lease expense and cash flows from leases (in thousands) follow.

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 

Finance lease cost:

               

Amortization of right-of use assets, included in cost of goods sold

  $ 20     $ 21  

Interest on lease liabilities

    2       3  

Operating lease cost, included in selling, general and administrative expenses:

               

Fixed leases cost

    129       129  

Variable lease cost

    46       38  

Short-term lease cost

    7       -  

Total lease cost

  $ 204     $ 191  
                 

Cash paid for amounts included in the measurement of lease liabilities:

               

Operating cash flows from finance leases

  $ 2     $ 4  

Operating cash flows from operating leases

  $ 129     $ 129  

Financing cash flows from finance leases

  $ 24     $ 26  

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

As of March 31, 2022, variable lease payments do not depend on a rate or index. As of March 31, 2022 and December 31, 2021, property and equipment, net, includes $0.2 million of finance lease right-of-use-assets, with an original cost of $0.5 million. During the three months ended March 31, 2022 and 2021, we financed the purchase of less than $0.1 million of property and equipment in noncash finance lease transactions.

 

As of March 31, 2022, we do not believe it is certain that we will exercise any renewal options. The remaining terms of our leases and the discount rates used in the calculation of the fair value of our leases as of March 31, 2022, follows.

 

   

Operating

Leases

   

Finance

Leases

 

Remaining leases terms (in years)

  1.6 - 10.9     0.2 - 4.6  

Weighted average remaining lease terms (in years)

      5.9         2.4  

Discount rates

  6.3% - 9.0 %   2.8% - 7.3 %

Weighted average discount rate

      7.7 %       4.8 %

 

Maturities of lease liabilities as of March 31, 2022, follows (in thousands).

 

   

Operating

   

Finance

 
   

Leases

   

Leases

 

2022 (nine months ended December 31, 2022)

  $ 364     $ 67  

2023

    528       65  

2024

    429       25  

2025

    439       10  

2026

    451       7  

Thereafter

    578       -  

Total lease payments

    2,789       174  

Amounts representing interest

    (599 )     (6 )

Present value of lease obligations

  $ 2,190     $ 168  

 

 

NOTE 9. DEBT

 

We finance certain amounts owed for annual insurance premiums under financing agreements. As of March 31, 2022, amounts due under insurance premium financing agreements are due in monthly installments of principal and interest through May 2022, at interest rates of 3.7% to 4.0% per year.

 

We borrow under a factoring agreement with a lender, which provides a $7.0 million credit facility. We may only borrow to the extent we have qualifying accounts receivable as defined in the agreement. The facility had an initial two-year term and automatically renews for successive annual periods, unless proper termination notice is given. The facility term has automatically extended to October 2022. We paid a $0.2 million facility fee upon inception of the agreement which amortized to interest expense on a straight-line basis over the two years ending in October 2021. We incur recurring fees under the agreement, including a funding fee of 0.5% above the prime rate, in no event to be less than 5.5%, on any advances and a service fee on average net funds borrowed. The lender has the right to demand repayment of the advances at any time. The lender has a security interest in personal property assets.

 

Additional information related to our factoring obligation follows.

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 

Average borrowings outstanding (in thousands)

  $ 2,822     $ 879  

Amortization of debt issuance costs (in thousands)

  $ 23     $ 23  

Fees paid, as a percentage of average oustanding borrowings

    1.2 %     1.5 %

Interest paid, as a percentage of average outstanding borrowings

    1.5 %     1.8 %

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Long-term debt consists of the following (in thousands).

 

   

March, 31

   

December 31,

 
   

2022

   

2021

 

Mortgage promissory note - Originally dated July 2020 and modified in December 2021. As modified, interest accrues at an annual rate which is the greater of 7.0% above the lender's prime rate and 10.3% (10.3% at March 31, 2022) payable in monthly installments through December 2023. Net of $25 debt issuance costs at March 31, 2022. Face amount $2.5 million. Interest accrued at the effective discount rate 11.5%. Secured by certain real property in Wynn, Arkansas.

  $ 2,190     $ 2,469  

Equipment note - Dated May 2021. Original principal $46. Due in monthly installments through June 2025. Interest accrues at the effective discount rate of 3.6% per year.

    31       33  

Equipment note - Dated December 2019. Original principal $40. Due in monthly installments through December 2024. Interest accrues at the effective discount rate of 9.3% per year.

    24       26  

Equipment notes - Initially recorded in November 2018, in an acquisition, at the present value of future payments using a discount rate of 4.8% per year. Due in monthly installments through August 2022.

    7       11  

Total long term debt, net

  $ 2,252     $ 2,539  

 

Future principal maturities of long-term debt outstanding as of March 31, 2022, follow (in thousands).

 

2022 (nine months ended December 31, 2022)

  $ 920  

2023

    1,332  

2024

    20  

2025

    5  

Principal maturities

    2,277  

Debt issuance costs

    (25 )

Total long term debt, net

  $ 2,252  

 

 

NOTE 10. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS

 

A summary of equity activity for the three months ended March 31, 2022 and 2021, follows (in thousands, except share amounts).

 

   

Shares

                               
   

Preferred

           

Preferred

   

Common

     Accumulated           
   

Series G

   

Common

   

Stock

   

Stock

   

Deficit

   

Equity

 

Balance, December 31, 2021

    150       51,589,674     $ 75     $ 326,279     $ (307,859 )   $ 18,495  

Common stock awards under equity incentive plans

    -       224,751       -       241       -       241  

Common stock issued to vendor

    -       6,000       -       5       -       5  

Net income

    -       -       -       -       (1,516 )     (1,516 )

Balance, March 31, 2022

    150       51,820,425     $ 75     $ 326,525     $ (309,375 )   $ 17,225  

 

 

   

Shares

                               
   

Preferred

           

Preferred

   

Common

     Accumulated            
   

Series G

   

Common

   

Stock

   

Stock

   

Deficit

   

Equity

 

Balance, December 31, 2020

    225       45,238,087     $ 112     $ 322,218     $ (298,910 )   $ 23,420  

Common stock awards under equity incentive plans

    -       29,943       -       250       -       250  

Common stock issued to vendor

    -       6,000       -       3       -       3  

Other

                          (3 )           (3 )

Net income

    -       -       -       -       591       591  

Balance, March 31, 2021

    225       45,274,030     $ 112     $ 322,468     $ (298,319 )   $ 24,261  

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Share-based compensation by type of award for the three months ended March 31, 2022, follows (in thousands).

 

Stock options

  $ 29  

Restricted stock units

    212  

Compensation expense related to common stock awards issued under equity incentive plan

  $ 241  

 

In the three months ended March 31, 2022, holders forfeited options for the purchase of up to 9,703 shares of common stock (average $1.85 per share exercise price, average 7.7-year remaining life).

 

Restricted stock unit (RSU) activity for the three months ended March 31, 2022, follows.

 

   

RSU Shares

Issued to

Employees

   

Unrecognized

Stock

Compensation

(in thousands)

   

Weighted

Average

Expense

Period

(Years)

 

Nonvested at December 31, 2021

    1,266,033     $ (658 )     0.9  

Granted

    370,000       (153 )     2.0  

Forfeited

    (10,000 )     7       0.7  

Vested

    (224,751 )     -       0.0  

Expensed

    -       212          

Nonvested at March 31, 2022

    1,401,282     $ (592 )     0.9  

 

The shares of common stock subject to the RSUs granted in 2022 vest within two years of the grant. As of March 31, 2022, issuance of 1,209,092 shares of common stock subject to certain RSUs, 865,052 of which are vested, is deferred to the date the holder is no longer providing service to RiceBran Technologies.

 

In the three months ended March 31, 2022, we issued 2,957,545 RSUs to employees that are subject to our shareholders approving an increase in the total shares of common stock authorized for issuance under the Amended and Restated 2014 Equity Incentive Plan. The shares of common stock subject to the RSUs will vest over an average of four years from the date shareholders approve the increase and are not included in the table above.

 

In the three months ended March 31, 2022, warrants for the purchase of up to 6,142,980 shares of common stock ($0.96 per share exercise price) expired.

 

On April 28, 2022, we issued a total of 348,721 shares of common stock to two resigning directors pursuant to the terms of their vested RSUs. Issuance of the shares of common stock subject to these RSUs had been deferred to the date the holder was no longer providing service to RiceBran Technologies.

 

 

NOTE 11. INCOME TAXES

 

Our tax expense for the three months ended  March 31, 2022 and 2021, differs from the tax expense computed by applying the U.S. statutory tax rate to net loss from continuing operations before income taxes as no tax benefits were recorded for tax losses generated in the U.S. As of March 31, 2022, we had deferred tax assets primarily related to U.S. federal and state tax loss carryforwards. We provided a full valuation allowance against our deferred tax assets as future realization of such assets is not more likely than not to occur.

 

 

NOTE 12. EARNINGS PER SHARE (EPS)

 

Basic EPS is calculated under the two-class method under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. Our outstanding convertible preferred stock are considered participating securities as the holders may participate in undistributed earnings with holders of common shares and are not obligated to share in our net losses.

 

Diluted EPS is computed by dividing the net income attributable to our common shareholders by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the impact of assumed exercises and conversions is dilutive. The dilutive effects of outstanding options, warrants, nonvested shares of common stock and nonvested restricted stock units that vest solely on the basis of a service condition are calculated using the treasury stock method. The dilutive effects of the outstanding preferred stock are calculated using the if-converted method.

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Reconciliations of the numerators and denominators in the EPS computations follow.

 

   

Three Months Ended March 31,

 
   

2022

   

2021

 

NUMERATOR (in thousands):

               

Net income (loss)

  $ (1,516 )   $ 591  

Allocation of earnings to participating convertible preferred stock

    -       (3 )

Numerator for basic EPS - income (loss) available to common shareholders

    (1,516 )     588  

Effect of dilutive securities:

               

Add back - allocation of earnings to participating convertible preferred stock

    -       3  

Reallocation of earnings to participating convertible preferred stock considering potentially dilutive securities

    -       (3 )

Numerator for diluted EPS - adjusted income (loss) available to common shareholders

  $ (1,516 )   $ 588  
                 

DENOMINATOR:

               

Weighted average number of shares of shares of common stock outstanding

    51,664,912       45,248,782  

Weighted average number of shares of common stock underlying vested restricted stock units

    865,052       386,403  

Denominator for basic EPS - weighted average number of shares outstanding

    52,529,964       45,635,185  

Effect of dilutive securities:

               

Nonvested restricted stock units

    -       845,893  

Stock options

    -       9,626  

Warrants

    -       65,543  

Denominator for diluted EPS - adjusted weighted average number of shares outstanding

    52,529,964       46,556,247  

 

No effects of potentially dilutive securities outstanding were included in the calculation of diluted EPS for the three months ended March 31, 2022, because to do so would be antidilutive as a result of our net loss. Potentially dilutive securities outstanding during the three months ended March 31, 2022, included our outstanding convertible preferred stock, options, warrants and nonvested RSUs. The effects of the following potentially dilutive securities, outstanding at March 31, 2021, were not included in the computation of diluted EPS for the three months ended March 31, 2021, because to do so would have been antidilutive: stock options for the purchase of 578,121 shares of our common stock and warrants for the purchase of 50,000 shares of our common stock.

 

 

NOTE 13. FAIR VALUE MEASUREMENTS

 

The fair value of cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and commodities approximates their carrying value due to shorter maturities. As of March 31, 2022, the fair values of our debt and finance lease liabilities and operating lease liabilities approximated their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements).

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our consolidated balance sheets (in thousands):

 

   

Level 1

   

Level 2

   

Level 3

   

Total

 
                                 

Total liabilities at fair value as of March 31, 2022 - Derivative warrant liability

  $ -     $ -     $ 429     $ 429  

Total liabilities at fair value as of December 31, 2021 - Derivative warrant liability

  $ -     $ -     $ 258     $ 258  

 

The following tables summarize the changes in level 3 items measured at fair value on a recurring basis for the three months ended March 31, 2022 (in thousands):

 

   

Fair Value

as of

Beginning

of Period

   

Total
Realized

and

Unrealized
Gains
(Losses)

   

Issuance of

New

Instruments

   

Net
Transfers
(Into) Out

of
Level 3

   

Fair Value,

at End of

Period

   

Change in

Unrealized

Gains

(Losses)

on

Instruments

Still Held

 
                                                 

Total Level 3 fair value - Derivative warrant liability

  $ 258     $ (171 )   $ -     $ -     $ 429     $ (171 )

 

The derivative warrant liability relates to a warrant issued in September 2021 for the purchase of up to 2,307,693 shares of common stock (Warrant A), The initial $1.00 per share exercise price of Warrant A is subject to adjustment in September 2022, and again in September 2023, if 110% of the 5-day volume weighted average price of our common stock is less than the then-current exercise price. Warrant A is carried in our consolidated balance sheets as derivative warrant liability because the holder may elect cash settlement of this warrant in the event of a change of control. We estimated the fair value of Warrant A as of March 31, 2022 and December 31, 2021, using the Black-Scholes value of a warrant with an exercise price of $1.00 per share. The changes in the estimated fair value of Warrant A are included in other income (loss) in our consolidated statements of operations. The assumptions used in valuing Warrant follows.

 

   

March 31, 2022

   

December 31, 2021

 

Assumed volatility

    75.1 %     69.5 %

Assumed risk free interest rate

    1.7 %     0.8 %

Expected life of options (in years)

    4.5       4.8  

Expected dividends

    -       -  

 

The fair value of Warrant A approximates the cash settlement the holder could elect to be paid in the event of a change in control. At March 31, 2022, a $0.10 increase in our stock price would have resulted in an approximate $151 thousand increase in the Black Scholes fair value of Warrant A.

 

 

NOTE 14. COMMITMENTS AND CONTINGENCIES

 

PPP Audit Contingency

 

In April 2020, we received $1.8 million on a Small Business Administration (SBA) Payroll Protection Program (PPP) loan as provided for in the Coronavirus Aid, Relief and Economic Security Act (CARES), enacted into U.S. law in March 2020. Under certain conditions, the loan and accrued interest were forgivable, if the loan proceeds were used for maintaining workforce levels. The loan proceeds were used for maintaining workforce levels and the entire loan, and related accrued interest, was forgiven, in its entirety in January 2021. The SBA may audit any PPP loan at its discretion through January 2027, six years after the date the SBA forgave the loan. The SBA may review any or all of the following when auditing a PPP loan: whether the borrower qualified for the PPP loan, whether the PPP loan amount was appropriately calculated and the proceeds used for allowable purposes, and whether the loan forgiveness amount was appropriately determined. We could be deemed ineligible for the PPP loan received in 2020 upon audit by the SBA. We believe the SBA’s stated intention is to focus its reviews on borrowers with loans greater than $2 million, thereby mitigating our future risk of an audit. The SBA continues to develop and issue new and updated guidance regarding required borrower certifications and requirements for forgiveness of loans made under the program.

 

 

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Employment Contracts and Severance Payments

 

In the normal course of business, we periodically enter into employment agreements which incorporate indemnification provisions. While the maximum amount to which we may be exposed under such agreements cannot be reasonably estimated, we maintain insurance coverage, which we believe will effectively mitigate our obligations under these indemnification provisions. No amounts have been recorded in our financial statements with respect to any obligations under such agreements.

 

We have employment contracts with certain officers and key management that include provisions for potential severance payments in the event of without-cause terminations or terminations under certain circumstances after a change in control. In addition, vesting of outstanding nonvested equity grants would accelerate following a change in control.

 

Legal Matters

 

From time to time, we are involved in litigation incidental to the conduct of our business. These matters may relate to employment and labor claims, patent and intellectual property claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position or results of operations. Defense costs are expensed as incurred and are included in professional fees.

 

 

NOTE 15. RELATED PARTY TRANSACTIONS

 

Our former director, Ari Gendason, is an employee and senior vice president and chief investment officer of Continental Grain Company (CGC). As of the date of this filing, CGC owns approximately 17.7% of our outstanding common stock. We have agreed that in connection with each annual or special meeting of our shareholders at which members of our board of directors are to be elected, or any written consent of our shareholders pursuant to which members of the board of directors are to be elected, CGC shall have the right to designate one nominee to our board of directors. CGC permanently waived this right effective April 28, 2022.

 

 

NOTE 16. FAILURE TO COMPLY WITH NASDAQ LISTING REQUIREMENTS

 

On September 15, 2021, we received a notification letter from The Nasdaq Stock Market LLC (Nasdaq) indicating that we have failed to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires that companies listed on the Nasdaq Capital Market maintain a minimum bid price of $1.00. To regain compliance with this listing rule, the closing bid price of our common stock has to be at least $1.00 for a period of Nasdaq's discretion, of at least 10, but not to exceed 20, consecutive business days. As of the date of this filing, we have not regained compliance with the minimum bid price requirement, however, we obtained from Nasdaq an additional 180-day compliance period, which extends through September 12, 2022. We are committed to taking actions that would enable us to regain compliance, including, if necessary, completing a reverse split of our common stock to increase its share price above the $1.00 minimum bid price.

 

14

 

 

 

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations

 

Revenues were $10.6 million in the first quarter of 2022, an increase of $2.0 million, or 23%, compared to revenues in the first quarter of 2021. This year-over-year increase was due to higher core-SRB sales and strong growth from our MGI Grain Incorporated (MGI) and Golden Ridge Rice Mills, LLC (Golden Ridge) milling businesses, offset in part by lower Value-Add SRB derivative sales due to the timing of large customer deliveries versus a year ago.

 

Gross profit was $0.5 million in the first quarter of 2022, compared to $0.7 million in the first quarter of 2021. The $0.2 million decrease in gross profit was primarily attributable to lower sales of Value-Add SRB derivatives versus a year ago and higher input and logistics costs at our core-SRB business, offset by strong growth in profitability at MGI, and lower losses from Golden Ridge.

 

Selling, general and administrative (SG&A) expenses were $1.7 million in the first quarter of 2022, a 3% reduction from the first quarter of 2021, as reductions in corporate support headcount and outside professional services were offset in part by higher wage rates and insurance expenses. Operating losses were $1.2 million in the first quarter of 2022, up from $1.1 million in the first quarter of 2021, due to lower gross profits.

 

In March 2022, we recognized a $0.2 million charge for the change in the fair value of a warrant liability, and in January 2021, we recognized a $1.8 million gain on extinguishment of our Small Business Administration (SBA) Paycheck Protection Program (PPP) loan (see Note 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of the loan).

 

As a result of higher operating losses and the nonrecurring gain on the extinguishment of debt in the first quarter of 2021, net loss in the first quarter of 2022 was $1.5 million, or $0.03 per share, compared to net income of $0.6 million, or $0.01 per share, in the first quarter of 2021.

 

COVID-19 Assessment

 

The COVID-19 pandemic is a worldwide health crisis that is adversely affecting the business and financial markets of many countries, disrupting global supply chains, and creating volatility in the financial markets. The pandemic could adversely affect the demand for our products, and it poses the risk that we, or our customers, suppliers, and other business partners may be disrupted or prevented from conducting business for an uncertain period of time. The extent to which this would impact our financial results is unknown as it is dependent on future developments, which are highly uncertain and cannot be predicted. As such, it is difficult to estimate the exact magnitude of the COVID-19 pandemic on our business.

 

We have not had, and we do not expect, any of our facilities to be closed subject to government-mandated closures, and we have informed our customers that we anticipate operating throughout the COVID-19 outbreak. Disruption in the supply chain of raw materials used to produce our products, as a result of the COVID-19 outbreak, has not caused us to close any of our facilities, and to date, our employees have been reporting to work, either remotely or in-person without any material change in attendance or productivity. However, we cannot ensure that the COVID-19 outbreak will not cause disruptions to our business in the future.

 

Liquidity and Capital Resources

 

We had $5.9 million in cash and equivalents as of March 31, 2022, an increase of $0.1 million from $5.8 million on December 31, 2021. During the first quarter of 2022, we were able to offset cash operating losses with improved working capital management neutralizing cash used in operating activities. Cash used for investing activities consisted of $0.2 million in capital expenditures, primarily for the purchase and installation of capital equipment at our Golden Ridge and MGI facilities, which was offset by $0.1 million in proceeds from insurance on involuntary conversion.

 

On March 30, 2020, we entered into a sales agreement with respect to an at-the-market (ATM) offering program, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $6.0 million, which we currently have $2.8 million remaining. Under the terms of the securities purchase agreement related to the September 2021 offering, we are prohibited from entering into an agreement to effect any at-the-market issuance until September 13, 2023. As of the date of this filing, management believes we have sufficient capital reserves to fund the operations of the business through the company’s expected transition to profitability or positive cash flow.

 

 

Critical Accounting Estimates

 

Our discussion and analysis of our financial condition and results of operations are based upon unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the financial statements. On an ongoing basis, we evaluate the estimates, including, but not limited to, those related to revenue recognition, inventory valuation, and long-lived asset impairment. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. As of March 31, 2022, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 2021 Annual Report on Form 10-K

 

Recent Accounting Pronouncements

 

See Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures.

 

We evaluated, with the participation of our executive chairman, and chief financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our executive chairman and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

Changes in Internal Control over Financial Reporting

 

During the most recently completed fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the quarter ended March 31, 2022, we issued the securities described below without registration under the Securities Act. The description below does not include issuances that were disclosed previously on Current Reports on Form 8-K. Unless otherwise indicated below, the securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended. All issuances below were made without any public solicitation, to a limited number of sophisticated persons and were acquired for investment purposes only.

 

During the quarter ended March 31, 2022, we issued 6,000 shares of common stock to a service provider, that is not a natural person, as compensation for service provided. The shares were valued at an aggregate of $2,100.

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

None

 

 

Item 6. Exhibits

 

The following exhibits are attached hereto and filed herewith:

 

       

Incorporated by Reference

   

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

Number

 

Filing/Effective

Date

 

Filed

Here-

with

31.1

 

Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

                 

X

31.2

 

Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

                 

X

32.1

 

Certification by Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                 

X

101.INS (1)

 

Inline XBRL Instance Document

                 

X

101.SCH (1)

 

Inline XBRL Taxonomy Extension Schema Document

                 

X

101.CAL (1)

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

                 

X

101.DEF (1)

 

Inline XBRL Taxonomy Extension Calculation Definition Linkbase Document

                 

X

101.LAB (1)

 

Inline XBRL Taxonomy Extension Calculation Label Linkbase Document

                 

X

101.PRE (1)

 

Inline XBRL Taxonomy Extension Calculation Presentation Linkbase Document

                 

X

104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).                    

 

 

(1)

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

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 thereunto duly authorized.

 

Dated:  April 28, 2022

- RiceBran Technologies  
     
 

/s/ Peter G. Bradley

 
 

Peter G. Bradley

 

Director and Executive Chairman

 

 

/s/ Todd T. Mitchell

 
 

Todd T. Mitchell

 

Chief Financial Officer and Chief Operating Officer

 

19
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