RiceBran Technologies - Quarter Report: 2020 September (Form 10-Q)
UNITED STATES
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
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For the quarterly period ended September 30, 2020
| ☐ |
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
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87-0673375
|
|
|
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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1330 Lake Robbins Drive, Suite 250
The Woodlands, TX
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77380
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|
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(Address of Principal Executive Offices)
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(Zip Code)
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(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
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Trading symbol
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Name of each exchange on which registered
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Common Stock, no par value per share
|
|
RIBT
|
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The NASDAQ Capital Market
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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, a smaller reporting company, or an emerging growth 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.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller reporting company ☒
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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 November 2, 2020, shares of the registrant’s common stock outstanding totaled 41,972,594.
RiceBran Technologies
Form 10-Q
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PART I. FINANCIAL INFORMATION
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Page
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Item 1.
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3
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3 |
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4 |
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| 5 |
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| 6 |
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| 7 |
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Item 2.
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18
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Item 3.
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20
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Item 4.
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20
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PART II. OTHER INFORMATION
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Item 1.
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20
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Item 1A.
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20
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Item 2.
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21
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Item 3.
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21
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Item 4.
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21
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Item 5.
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21
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Item 6.
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21
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22
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Cautionary Note about Forward-Looking Statements
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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 Current Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2019. 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.
| Item 1. |
Financial Statements.
|
RiceBran Technologies
Three and Nine Months Ended September 30, 2020 and 2019
(Unaudited) (in thousands, except share and per share amounts)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Revenues
|
$
|
5,160
|
$
|
5,300
|
$
|
19,393
|
$
|
17,883
|
||||||||
|
Cost of goods sold
|
5,955
|
5,659
|
21,817
|
18,143
|
||||||||||||
|
Gross loss
|
(795
|
)
|
(359
|
)
|
(2,424
|
)
|
(260
|
)
|
||||||||
|
Selling, general and administrative expenses
|
1,875
|
3,835
|
7,040
|
10,598
|
||||||||||||
|
Operating loss
|
(2,670
|
)
|
(4,194
|
)
|
(9,464
|
)
|
(10,858
|
)
|
||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest income
|
-
|
19
|
19
|
42
|
||||||||||||
|
Interest expense
|
(70
|
)
|
(9
|
)
|
(195
|
)
|
(40
|
)
|
||||||||
|
Other income
|
-
|
859
|
5
|
865
|
||||||||||||
|
Other expense
|
(26
|
)
|
(1
|
)
|
(113
|
)
|
(5
|
)
|
||||||||
|
Total other income (expense), net
|
(96
|
)
|
868
|
(284
|
)
|
862
|
||||||||||
|
Loss before income taxes
|
(2,766
|
)
|
(3,326
|
)
|
(9,748
|
)
|
(9,996
|
)
|
||||||||
|
Income tax expense
|
(8
|
)
|
-
|
(8
|
)
|
-
|
||||||||||
|
Loss from continuing operations
|
(2,774
|
)
|
(3,326
|
)
|
(9,756
|
)
|
(9,996
|
)
|
||||||||
|
Loss from discontinued operations
|
-
|
-
|
-
|
(216
|
)
|
|||||||||||
|
Net loss
|
$
|
(2,774
|
)
|
$
|
(3,326
|
)
|
$
|
(9,756
|
)
|
$
|
(10,212
|
)
|
||||
|
Basic loss per common share:
|
||||||||||||||||
|
Continuing operations
|
$
|
(0.07
|
)
|
$
|
(0.10
|
)
|
$
|
(0.24
|
)
|
$
|
(0.31
|
)
|
||||
|
Discontinued operations
|
-
|
-
|
-
|
(0.01
|
)
|
|||||||||||
|
Basic loss per common share
|
$
|
(0.07
|
)
|
$
|
(0.10
|
)
|
$
|
(0.24
|
)
|
$
|
(0.32
|
)
|
||||
|
Diluted loss per common share:
|
||||||||||||||||
|
Continuing operations
|
$
|
(0.07
|
)
|
$
|
(0.10
|
)
|
$
|
(0.24
|
)
|
$
|
(0.31
|
)
|
||||
|
Discontinued operations
|
-
|
-
|
-
|
(0.01
|
)
|
|||||||||||
|
Diluted loss per common share
|
$
|
(0.07 |
)
|
$
|
(0.10
|
)
|
$
|
(0.24
|
)
|
$
|
(0.32
|
)
|
||||
|
Weighted average number of shares outstanding:
|
||||||||||||||||
|
Basic
|
40,824,281
|
33,057,010
|
40,279,866
|
31,947,087
|
||||||||||||
|
Diluted
|
40,824,281
|
33,057,010
|
40,279,866
|
31,947,087
|
||||||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements
RiceBran Technologies
Three and Nine Months Ended September 30, 2020 and 2019
(Unaudited) (in thousands)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Net loss
|
$
|
(2,774
|
)
|
$
|
(3,326
|
)
|
$
|
(9,756
|
)
|
$
|
(10,212
|
)
|
||||
|
Derivative financial instruments designated as cash flow hedges:
|
||||||||||||||||
|
Gains (losses) arising during the period
|
43
|
-
|
(57
|
)
|
-
|
|||||||||||
|
Reclassification of losses realized to cost of goods sold
|
5
|
-
|
57
|
-
|
||||||||||||
|
Net other comprehensive income
|
48
|
-
|
-
|
-
|
||||||||||||
|
Comprehensive loss
|
$
|
(2,726
|
)
|
$
|
(3,326
|
)
|
$
|
(9,756
|
)
|
$
|
(10,212
|
)
|
||||
See Notes to Unaudited Condensed Consolidated Financial Statements
RiceBran Technologies
(Unaudited) (in thousands, except share amounts)
|
September 30,
2020
|
December 31,
2019
|
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
3,890
|
$
|
8,444
|
||||
|
Accounts receivable, net of allowance for doubtful accounts of $23 and $347
|
2,446
|
3,738
|
||||||
|
Inventories
|
1,665
|
898
|
||||||
|
Other current assets
|
1,619
|
691
|
||||||
|
Total current assets
|
9,620
|
13,771
|
||||||
|
Property and equipment, net
|
17,289
|
19,077
|
||||||
|
Operating lease right-of-use assets
|
2,527
|
2,752
|
||||||
|
Goodwill
|
3,915
|
3,915
|
||||||
|
Intangible assets
|
777
|
950
|
||||||
|
Other long-term assets
|
-
|
27
|
||||||
|
Total assets
|
$
|
34,128
|
$
|
40,492
|
||||
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$
|
845
|
$
|
833
|
||||
|
Commodities payable
|
554
|
829
|
||||||
|
Accrued salary, wages and benefits
|
879
|
877
|
||||||
|
Accrued expenses
|
439
|
884
|
||||||
|
Customer prepayments
|
-
|
12
|
||||||
|
Operating lease liabilities, current portion
|
334
|
309
|
||||||
|
Due under insurance premium finance agreements
|
327
|
116
|
||||||
|
Due under factoring agreement
|
1,814
|
1,823
|
||||||
|
Finance lease liabilities, current portion
|
89
|
101
|
||||||
|
Long-term debt, current portion
|
575
|
28
|
||||||
|
Total current liabilities
|
5,856
|
5,812
|
||||||
|
Operating lease liabilities, less current portion
|
2,403
|
2,674
|
||||||
|
Finance lease liabilities, less current portion
|
132
|
190
|
||||||
|
Long-term debt, less current portion
|
2,264
|
73
|
||||||
|
Total liabilities
|
10,655
|
8,749
|
||||||
|
Commitments and contingencies
|
||||||||
|
Shareholders' equity:
|
||||||||
|
Preferred stock, 20,000,000 shares authorized: Series G, convertible, 3,000 shares authorized, stated value $225,225 shares, issued and outstanding
|
112
|
112
|
||||||
|
Common stock, no par value, 150,000,000 shares authorized, 41,972,594 shares and 40,074,483 shares, issued and outstanding
|
320,297
|
318,811
|
||||||
|
Accumulated deficit
|
(296,936
|
)
|
(287,180
|
)
|
||||
|
Total shareholders' equity
|
23,473
|
31,743
|
||||||
|
Total liabilities and shareholders' equity
|
$
|
34,128
|
$
|
40,492
|
||||
See Notes to Unaudited Condensed Consolidated Financial Statements
RiceBran Technologies
Nine Months Ended September 30, 2020 and 2019
(Unaudited) (in thousands)
|
2020
|
2019
|
|||||||
|
Cash flow from operating activities:
|
||||||||
|
Net loss
|
$
|
(9,756
|
)
|
$
|
(10,212
|
)
|
||
|
Loss from discontinued operations
|
-
|
216
|
||||||
|
Loss from continuing operations
|
(9,756
|
)
|
(9,996
|
)
|
||||
|
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities
|
||||||||
|
Depreciation
|
1,804
|
1,332
|
||||||
|
Amortization
|
173
|
39
|
||||||
|
Stock and share-based compensation
|
817
|
925
|
||||||
|
Loss on disposition of property and equipment
|
305
|
-
|
||||||
|
Loss on involuntary conversion of assets
|
100
|
-
|
||||||
|
Settlement with sellers of Golden Ridge
|
-
|
(849
|
)
|
|||||
|
Other
|
(18
|
)
|
166
|
|||||
|
Changes in operating assets and liabilities, net of impact of acquisitions:
|
||||||||
|
Accounts receivable
|
1,360
|
(215
|
)
|
|||||
|
Inventories
|
(767
|
)
|
388
|
|||||
|
Accounts payable and accrued expenses
|
(651
|
)
|
(271
|
)
|
||||
|
Commodities payable
|
(275
|
)
|
(1,896
|
)
|
||||
|
Other
|
(320
|
)
|
(308
|
)
|
||||
|
Net cash used in operating activities
|
(7,228
|
)
|
(10,685
|
)
|
||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment
|
(1,060
|
)
|
(3,513
|
)
|
||||
|
Proceeds from insurance on involuntary converison
|
250
|
-
|
||||||
|
Proceeds from sale of property
|
15
|
-
|
||||||
|
Acquisition of MGI
|
-
|
(3,767
|
)
|
|||||
|
Net cash used in investing activities - continuing operations
|
(795
|
)
|
(7,280
|
)
|
||||
|
Net cash used in investing activities - discontinued operations
|
-
|
(475
|
)
|
|||||
|
Cash flows from financing activities:
|
||||||||
|
Payments on factoring agreement
|
(20,663
|
)
|
-
|
|||||
|
Advances on factoring agreement
|
20,584
|
-
|
||||||
|
Advances on insurance premium finance agreements
|
802
|
643
|
||||||
|
Payments on insurance premium finance agreements
|
(591
|
)
|
(415
|
)
|
||||
|
Advances on debt and finance lease liabilities
|
2,792
|
-
|
||||||
|
Payments on debt and finance lease liabilities
|
(124
|
)
|
(331
|
)
|
||||
|
Proceeds from issuances of common stock and prefunded warrant, net of issuance costs
|
657
|
11,593
|
||||||
|
Proceeds from common stock warrant exercises
|
12
|
1,990
|
||||||
|
Proceeds from common stock option exercises
|
-
|
156
|
||||||
|
Proceeds from margin loan
|
-
|
1,225
|
||||||
|
Net cash provided by financing activities
|
3,469
|
14,861
|
||||||
|
Net change in cash and cash equivalents and restricted cash
|
$
|
(4,554
|
)
|
$
|
(3,579
|
)
|
||
|
Cash and cash equivalents and restricted cash, beginning of period
|
||||||||
|
Cash and cash equivalents
|
$
|
8,444
|
$
|
7,044
|
||||
|
Restricted cash
|
-
|
225
|
||||||
|
Cash and cash equivalents and restricted cash, beginning of period
|
8,444
|
7,269
|
||||||
|
Cash and cash equivalents and restricted cash, end of period
|
||||||||
|
Cash and cash equivalents
|
3,890
|
3,690
|
||||||
|
Restricted cash
|
-
|
-
|
||||||
|
Cash and cash equivalents and restricted cash, end of period
|
3,890
|
3,690
|
||||||
|
Net change in cash and cash equivalents and restricted cash
|
$
|
(4,554
|
)
|
$
|
(3,579
|
)
|
||
|
Supplemental disclosures:
|
||||||||
|
Cash paid for interest
|
$
|
126
|
$
|
40
|
||||
|
Cash paid for income taxes
|
$
|
7
|
$
|
-
|
||||
See 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 (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, 2019, 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 producing value-added processing and marketing of healthy, natural and nutrient dense products derived from rice and other small grains, and the
by-products created in the milling of these grains. Notably, we apply our proprietary technologies to convert raw rice bran into stabilized rice bran (SRB), and high value 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 the production of products for both human and animal consumption. We believe SRB has certain inherent qualities that make it more attractive for
this purpose than food additives based on the by-products of other agricultural commodities, such as corn and soybeans. Our SRB and refined SRB products and 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 natural food, food and animal nutrition manufacturers, wholesalers and
retailers, both domestically and internationally.
We manufacture and distribute SRB in various granulations from four locations: two leased facilities located within supplier-owned rice mills in Arbuckle and West Sacramento, California; one
company-owned facility in Mermentau, Louisiana; and our company-owned rice mill in Wynne, Arkansas. At our Dillon, Montana facility, we produce SRB based products and derivatives that have been further refined through our proprietary processes. Our
rice mill in Wynne, Arkansas also supplies grades U.S. No. 1 and No. 2 premium long and medium white rice. We also own a grain processing facility in East Grand Forks, Minnesota, at which we mill a variety of grains which we offer to the market.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Guidance
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.
In June 2016, the Financial Accounting Standards Board (FASB) issued guidance ASU No. 2016-13
Financial Instruments—Credit 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.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Recently adopted accounting standards
In December 2019, the FASB issued guidance ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying the
Accounting for Income Taxes which, among other things, removed an exception in the guidance to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations
and income or a gain from other items such as discontinued operations. We early adopted the guidance effective January 1, 2020. Adoption of the guidance had no impact on our results of operations, financial position, or cashflows.
Reclassifications – Certain reclassifications have been made to amounts reported for the prior period to achieve consistent
presentation with the current period. Such reclassifications had no impact on previously reported net loss or shareholders’ equity.
Derivative Financial Instruments
In May 2020, we began, from time to time, to use derivative financial instruments to manage a portion of our risks related to commodity prices. We do not use derivative financial instruments for trading or speculative
purposes. Changes in the fair value of derivative financial instruments are recognized either in cost of goods sold or in shareholders’ equity as a component of other comprehensive income (loss) (OCI), depending on whether the derivative financial
instrument is undesignated or qualifies for hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges. Gains and losses on derivatives designated as cash flow hedges, to the extent they are included in the assessment of effectiveness, are recorded in OCI and subsequently reclassified to cost of
goods sold to offset the impact of the hedged items when they occur. In the event it becomes probable the forecasted transaction to which a cash flow hedge relates will not occur, the derivative is terminated and the
amount in accumulated OCI is recognized in earnings. All cash flows related to derivative financial instruments are classified as operating activities in our consolidated statements of cash flows.
NOTE 4. ACQUISITION
On April 4, 2019, we acquired substantially all of the assets comprising the business of MGI Grain Processing, LLC, a Minnesota limited liability company, now conducting business as
MGI Grain Incorporated (MGI). The results of MGI’s operations are included in our consolidated financial statements beginning April 4, 2019. The following table provides unaudited pro forma information
for the three months and nine months ended September 30, 2019, as if the MGI acquisition had occurred January 1, 2019.
|
Three Months Ended
September 30, 2019
|
Nine Months Ended
September 30, 2019
|
|||||||
|
Revenues (in thousands)
|
$
|
5,300
|
$
|
19,083
|
||||
|
Loss from continuing operations (in thousands)
|
$
|
(3,326
|
)
|
$
|
(9,865
|
)
|
||
|
Loss per share - continuing operations
|
$
|
(0.10
|
)
|
$
|
(0.31
|
)
|
||
|
Weighted average number of common shares outstanding - basic and diluted
|
33,057,010
|
31,947,087
|
||||||
No adjustments have been made in the pro forma information for synergies that are resulting or planned from the MGI acquisition. The unaudited proforma information is not indicative
of the results that may have been achieved had the companies been combined as of January 1, 2019, or of our future operating results.
NOTE 5. CASH AND CASH EQUIVALENTS
As of September 30, 2020, we have $2.4 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 money market fund represent material
risks.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 6. 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 and nine months ended September 30, 2020, include less than $0.1 million in revenue unearned as of December 31, 2019.
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
|
C
|
D |
|
||||||||||||
|
% of revenues, three months ended September 30, 2020
|
6
|
%
|
12
|
%
|
11
|
%
|
4
|
%
|
||||||||
|
% of revenues, three months ended September 30, 2019
|
10
|
%
|
13
|
%
|
11
|
%
|
3
|
%
|
||||||||
|
% of revenues, nine months ended September 30, 2020
|
11
|
%
|
10
|
%
|
5
|
%
|
3
|
%
|
||||||||
|
% of revenues, nine months ended September 30, 2019
|
14
|
%
|
11
|
%
|
10
|
%
|
1
|
%
|
||||||||
|
% of accounts receivable, as of September 30, 2020
|
5
|
%
|
19
|
%
|
12
|
%
|
10
|
%
|
||||||||
|
% of accounts receivable, as of December 31, 2019
|
31
|
%
|
10
|
%
|
8
|
%
|
10
|
%
|
||||||||
In all periods presented, less than 10% of our revenues related to shipments to locations outside of the U.S. The following table presents revenues by product line (in
thousands).
|
Three Months Ended September 30
|
Nine Months Ended September 30
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Food
|
$
|
3,160
|
$
|
3,573
|
$
|
13,319
|
$
|
12,685
|
||||||||
|
Animal nutrition
|
2,000
|
1,727
|
6,074
|
5,198
|
||||||||||||
|
Revenues
|
$
|
5,160
|
$
|
5,300
|
$
|
19,393
|
$
|
17,883
|
||||||||
NOTE 7. INVENTORIES
The following table details the components of inventories (in thousands).
|
September 30,
2020
|
December 31,
2019
|
|||||||
|
Finished goods
|
$
|
1,363
|
$
|
698
|
||||
|
Raw materials
|
180
|
90
|
||||||
|
Packaging
|
122
|
110
|
||||||
|
Inventories
|
$
|
1,665
|
$
|
898
|
||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 8. LEASES
The components of lease expense and cash flows from leases (in thousands) follow.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Finance lease cost:
|
||||||||||||||||
|
Amortization of right-of use assets, included in cost of goods sold
|
$
|
21
|
$
|
19
|
$
|
62
|
$
|
50
|
||||||||
|
Interest on lease liabilities
|
3
|
5
|
11
|
10
|
||||||||||||
|
Operating lease cost, included in selling, general and administrative expenses:
|
||||||||||||||||
|
Fixed leases cost
|
127
|
131
|
388
|
392
|
||||||||||||
|
Variable lease cost
|
41
|
35
|
89
|
99
|
||||||||||||
|
Short-term lease cost
|
-
|
13
|
3
|
29
|
||||||||||||
|
Total lease cost
|
$
|
192
|
$
|
203
|
$
|
553
|
$
|
580
|
||||||||
|
Cash paid for amounts included in the measurement of lease liabilities:
|
||||||||||||||||
|
Operating cash flows from finance leases
|
$
|
3
|
$
|
5
|
$
|
11
|
$
|
10
|
||||||||
|
Operating cash flows from operating leases
|
$
|
127
|
$
|
131
|
$
|
388
|
$
|
392
|
||||||||
|
Financing cash flows from finance leases
|
$
|
29
|
$
|
23
|
$
|
75
|
$
|
54
|
||||||||
As of September 30, 2020, variable lease payments do not depend on a rate or index. As of September 30, 2020, property and equipment, net, includes $0.3 million of finance lease right-of-use-assets, with an original cost of $0.4 million.
As of September 30, 2020, 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 September 30, 2020, follows.
|
Operating
Leases
|
Finance
Leases
|
|||||||
|
Remaining leases terms (in years)
|
3.1-12.4
|
0.3-3.8
|
||||||
|
Weighted average remaining lease terms (in years)
|
7.2
|
2.7
|
||||||
|
Discount rates
|
6.3%-9.0
|
%
|
4.3%-7.3
|
%
|
||||
|
Weighted average discount rate
|
7.6
|
%
|
5.9
|
%
|
||||
Maturities of lease liabilities as of September 30, 2020, follows (in thousands).
|
Operating
Leases
|
Finance
Leases
|
|||||||
|
2020 (three months ended December 31, 2020)
|
$
|
116
|
$
|
28
|
||||
|
2021
|
536
|
91
|
||||||
|
2022
|
548
|
68
|
||||||
|
2023
|
528
|
38
|
||||||
|
2024
|
428
|
11
|
||||||
|
Thereafter
|
1,468
|
-
|
||||||
|
Total lease payments
|
3,624
|
236
|
||||||
|
Amounts representing interest
|
(887
|
)
|
(15
|
)
|
||||
|
Present value of lease obligations
|
$
|
2,737
|
$
|
221
|
||||
NOTE 9. DEBT
In the three and nine months ended September 30, 2020, we financed amounts owed for annual insurance premiums under financing agreements. As of September 30, 2020, amounts due under insurance premium financing
agreements are due in monthly installments of principal and interest through January 2021, at interest rates of 4.7% to 5.5% per year.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
In October 2019, we entered into a factoring agreement which provides for a $7.0 million credit facility with a lender. We may only borrow to the extent we have qualifying accounts receivable as defined in the
agreement. The facility has an initial two-year term and automatically renews for successive annual periods, unless proper termination notice is given. We paid a $0.2 million facility fee upon inception of the agreement which is amortizing to
interest expense on a straight-line basis over two years. 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. During the three and nine months ended September 30, 2020, outstanding borrowings under the agreement averaged $1.7 million and $1.9 million per day, respectively. During the three months ended September 30, 2020, we expensed less than
$0.1 million of interest and fees under the agreement. On an annualized basis, fees incurred during the three months ending September 30, 2020 averaged 5.6% (exclusive of deferred cost amortization) and interest averaged 6.0% of the amounts
outstanding under the facility. During the nine months ended September 30, 2020, we expensed $0.2 million of interest and fees under the agreement. On an annualized basis, fees incurred during the nine months ending September 30, 2020 averaged 7.9%
(exclusive of deferred cost amortization) and interest averaged 6.3% of the amounts outstanding under the facility. Amortization of debt issuance costs in the nine months ended September 30, 2020, was $0.1 million. The lender has the right to demand
repayment of the advances at any time.
Due under factoring agreement consists of the following (in thousands).
|
September 30,
2020
|
December 31,
2019
|
|||||||
|
Borrowings outstanding
|
$
|
1,912
|
$
|
1,989
|
||||
|
Debt issuance costs, net
|
(98
|
)
|
(166
|
)
|
||||
|
Due under factoring agreement
|
$
|
1,814
|
$
|
1,823
|
||||
Long-term debt consists of the following (in thousands).
|
September 30,
2020
|
December 31,
2019
|
|||||||
|
Payroll Protection Program note - Dated April 2020. Interest accrues at an annual rate of 1.0%.
|
||||||||
|
Due in monthly installments from November 2020 to April 2022, unless forgiven as described below.
|
$
|
1,792
|
$
|
-
|
||||
|
Mortgage promissory note - Dated September 2020. Interest accrues at an annual rate which is the greater of 11.0% above the lender's prime rate and 14.3%. Payable in
monthly installments through June 2022.
|
985
|
-
|
||||||
|
Debt issuance costs, net - Related to mortgage promissory note dated September 2020
|
(15
|
)
|
-
|
|||||
|
Equipment notes - Initially recorded in November 2018, in the acquisition of Golden Ridge, at the present value of future payments using a discount rate of 4.8% per
year, which we determined approximated the market rate for similar debt with similar maturities as of the date of acquisition. Payable in monthly installments.
Expire at dates ranging through 2022.
|
43
|
62
|
||||||
|
Equipment note - Dated December 2019. Due in monthly installments through December 2024.
|
||||||||
|
Interest accrues at the effective discount rate of 9.3% per year.
|
34
|
39
|
||||||
|
Total long term debt, net
|
$
|
2,839
|
$
|
101
|
||||
In April 2020, we received $1.8 million on an SBA Payroll Protection Program 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 are forgivable, specifically, if the loan proceeds were used for eligible purposes, including payroll, benefits, rent and utilities, and maintaining payroll levels. The amount of loan forgiveness will be
reduced if we terminated employees or reduced salaries during the applicable period. Any portion of the loan that is not forgiven is payable over two years at an interest rate of 1.0%, with a deferral of payments for the first six months. We
believe we have used the proceeds for purposes consistent with the program. As such, we currently believe that our use of the loan proceeds will meet the conditions for forgiveness of the loan, however, we cannot assure that we will be eligible for
forgiveness of the loan, in whole or in part.
In July 2020, we entered into a mortgage agreement with a lender pursuant to a promissory note. In September 2020, we borrowed $1.0 million on the note and, in October 2020, we borrowed the remaining $1.0 million
available on the note. Interest on this note accrues at an annual rate which is the greater of 11.0% above the lender’s prime rate and 14.3%. In addition, we will incur a facility fee equal to 1.0% of the amount of each advance under the
promissory note. The principal amount of the note must be repaid in monthly installments ending in June 2022. The note is secured by certain real property and personal property assets of Golden Ridge Rice Mill, Inc. As of September 30, 2020, the
note bore interest at an annual rate of 14.3%.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 10. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS
In June 2020, our shareholders approved, and we filed an amendment to our articles of incorporation, increasing our authorized shares of common stock from 50,000,000 to 150,000,000.
A summary of equity activity follows (in thousands, except share amounts).
|
Shares
|
|
Accumulated Other
|
||||||||||||||||||||||||||
|
Preferred
Series G
|
Common
|
Preferred
Stock
|
Common
Stock
|
Accumulated
Deficit
|
Comprehensive
Loss
|
Equity
|
||||||||||||||||||||||
|
Balance, December 31, 2019
|
225
|
40,074,483
|
$
|
112
|
$
|
318,811
|
$
|
(287,180
|
)
|
$
|
-
|
$
|
31,743
|
|||||||||||||||
|
Common stock awards under equity incentive plans
|
-
|
17,534
|
-
|
312
|
-
|
-
|
312
|
|||||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
(3,033
|
)
|
-
|
(3,033
|
)
|
|||||||||||||||||||
|
Balance, March 31, 2020
|
225
|
40,092,017
|
112
|
319,123
|
(290,213
|
)
|
-
|
29,022
|
||||||||||||||||||||
|
Common stock awards under equity incentive plans
|
-
|
16,500
|
-
|
316
|
-
|
-
|
316
|
|||||||||||||||||||||
|
Common stock issued to vendors
|
-
|
31,304
|
-
|
36
|
-
|
-
|
36
|
|||||||||||||||||||||
|
Exercise of common stock warrants
|
-
|
67,577
|
-
|
12
|
-
|
-
|
12
|
|||||||||||||||||||||
|
Other comprehensive loss
|
-
|
-
|
-
|
-
|
-
|
(48
|
)
|
(48
|
)
|
|||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
(3,949
|
)
|
-
|
(3,949
|
)
|
|||||||||||||||||||
|
Balance, June 30, 2020
|
225
|
40,207,398
|
112
|
319,487
|
(294,162
|
)
|
(48
|
)
|
25,389
|
|||||||||||||||||||
|
Common stock awards under equity incentive plans
|
-
|
129,404
|
-
|
153
|
-
|
-
|
153
|
|||||||||||||||||||||
|
Sale of common stock, net of costs
|
-
|
1,635,792
|
-
|
657
|
-
|
-
|
657
|
|||||||||||||||||||||
|
Other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
48
|
48
|
|||||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
(2,774
|
)
|
-
|
(2,774
|
)
|
|||||||||||||||||||
|
Balance, September 30, 2020
|
225
|
41,972,594
|
$
|
112
|
$
|
320,297
|
$
|
(296,936
|
)
|
$
|
-
|
$
|
23,473
|
|||||||||||||||
|
Shares
|
||||||||||||||||||||||||
|
Preferred
Series G
|
Common
|
Preferred
Stock
|
Common
Stock
|
Accumulated
Deficit
|
Equity
|
|||||||||||||||||||
|
Balance, December 31, 2018
|
405
|
29,098,207
|
$
|
201
|
$
|
296,739
|
$
|
(273,229
|
)
|
$
|
23,711
|
|||||||||||||
|
Sale of common stock and Prefunded Warrant, net of costs
|
-
|
3,046,668
|
-
|
11,593
|
-
|
11,593
|
||||||||||||||||||
|
Common stock awards under equity incentive plans
|
-
|
36,881
|
-
|
364
|
-
|
364
|
||||||||||||||||||
|
Exercise of common stock warrants
|
-
|
600,000
|
-
|
1,980
|
-
|
1,980
|
||||||||||||||||||
|
Conversion of preferred stock into common stock
|
(180
|
)
|
170,818
|
(89
|
)
|
89
|
-
|
-
|
||||||||||||||||
|
Exercise of common stock options
|
-
|
77,078
|
-
|
60
|
-
|
60
|
||||||||||||||||||
|
Other
|
-
|
-
|
-
|
28
|
-
|
28
|
||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
(3,227
|
)
|
(3,227
|
)
|
||||||||||||||||
|
Balance, March 31, 2019
|
225
|
33,029,652
|
112
|
310,853
|
(276,456
|
)
|
34,509
|
|||||||||||||||||
|
Exercise of Prefunded Warrant
|
-
|
1,003,344
|
-
|
10
|
-
|
10
|
||||||||||||||||||
|
Common stock awards under equity incentive plans
|
-
|
134,984
|
-
|
219
|
-
|
219
|
||||||||||||||||||
|
Exercise of common stock options
|
-
|
78,734
|
-
|
87
|
-
|
87
|
||||||||||||||||||
|
Other
|
-
|
-
|
-
|
32
|
-
|
32
|
||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
(3,659
|
)
|
(3,659
|
)
|
||||||||||||||||
|
Balance, June 30, 2019
|
225
|
34,246,714
|
112
|
311,201
|
(280,115
|
)
|
31,198
|
|||||||||||||||||
|
Retirement of unvested shares
|
-
|
(830,124
|
)
|
-
|
-
|
-
|
-
|
|||||||||||||||||
|
Common stock awards under equity incentive plans
|
-
|
22,632
|
-
|
282
|
-
|
282
|
||||||||||||||||||
|
Exercise of common stock options
|
-
|
10,000
|
-
|
9
|
-
|
9
|
||||||||||||||||||
|
Retirement of shares received in settlement with the sellers of Golden Ridge
|
-
|
(340,000
|
)
|
-
|
(1,027
|
)
|
-
|
(1,027
|
)
|
|||||||||||||||
|
Net loss
|
-
|
-
|
-
|
-
|
(3,326
|
)
|
(3,326
|
)
|
||||||||||||||||
|
Balance, September 30, 2019
|
225
|
33,109,222
|
$
|
112
|
$
|
310,465
|
$
|
(283,441
|
)
|
$
|
27,136
|
|||||||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
On March 30, 2020, we entered into an at market issuance sales agreement with respect to an at-the-market 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 through B. Riley FBR, Inc, as sales agent. The issuances and sales of our common stock under the agreement are made pursuant to our effective “shelf” registration statement on Form S-3. During the
three months ended September 30, 2020, we issued and sold 1,635,792 shares of common stock under the agreement, at an average price of $0.50 per share. Proceeds from those sales are recorded in equity, net of $0.2 million of stock issuance costs.
Stock issuance costs consisted of $0.1 million of legal, advisor and auditor expenses paid in the three months ended March 31, 2020, and $0.1 million of other costs related to the offering paid in the three months ended September 30, 2020.
Share-based compensation by type of award follows (in thousands).
|
Three Months Ended
|
||||||||||||
|
Sept. 30, 2020
|
June 30, 2020
|
March 31, 2020
|
||||||||||
|
Common stock, vested and nonvested at issuance
|
$
|
78
|
$
|
95
|
$
|
105
|
||||||
|
Stock options
|
(86
|
)
|
99
|
85
|
||||||||
|
Restricted stock units
|
161
|
122
|
122
|
|||||||||
|
Compensation expense related to common stock awards issued under equity incentive plan
|
$ |
153
|
$ |
316
|
$ |
312
|
||||||
In the three months ended March 31, 2020, we issued 17,534 shares of common stock, vested at issuance, to a consultant at a grant date fair value of $1.11 per share and recognized $0.1 million of
expense for shares of common stock vesting during the period.
In the three months ended June 30, 2020, under the equity incentive plan, we (i) issued 16,500 shares of common stock, vested at June 30, 2020, at a grant date fair value or $1.16 per shares and
(ii) recognized $0.1 million of expense for shares of common stock vesting during the period. In the three months ended June 30, 2020, we issued 31,304 shares of common stock to a vendor, vested at June 30, 2020, at a grant date fair value or $1.14
per share.
In the three months ended September 30 2020, we issued (i) 42,383 shares of common stock, vested at issuance, to a consultant at an average grant date fair value of $0.53 per share, (ii) 32,510
shares of common stock, vested at issuance, to a director for board compensation at an average grant date fair value of $0.45 per share, and (iii) 54,511 shares of common stock, vested at issuance, to our former chief executive officer for employment
compensation and severance at an average grant date fair value of $0.76 per share,
As of September 30, 2020, there were no shares of nonvested common stock outstanding.
Stock option activity for the nine months ended September 30, 2020, follows.
|
Shares
Under
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Grant
Date Fair
Value
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|||||||||||||
|
Outstanding at December 31, 2019
|
996,009
|
$
|
3.23
|
8.1
|
||||||||||||
|
Granted
|
653,004
|
1.22
|
$
|
0.73
|
10.0
|
|||||||||||
|
Forfeited
|
(125,173
|
)
|
4.74
|
7.2
|
||||||||||||
|
Outstanding at March 31, 2020
|
1,523,840
|
2.24
|
8.8
|
|||||||||||||
|
Forfeited
|
(77,357
|
)
|
4.28
|
7.2
|
||||||||||||
|
Outstanding at June 30, 2020
|
1,446,483
|
$
|
2.13
|
8.6
|
||||||||||||
|
Forfeited
|
(654,334
|
)
|
1.97
|
8.8
|
||||||||||||
|
Outstanding at September 30, 2020
|
792,149
|
$
|
2.27
|
8.1
|
||||||||||||
Stock options granted in the three months ended March 31, 2020, each vest and become exercisable in annual installments ending four years from the date of grant and were valued using methods and
assumptions comparable to those for our 2019 stock option grants.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Restricted stock unit (RSU) activity for the nine months ended September 30, 2020, follows.
|
RSU Shares
Issued to
Employees
and
Directors
|
Unrecognized
Stock
Compensation
(in thousands)
|
Weighted
Average
Expense
Period
(Years)
|
||||||||||
|
Nonvested at December 31, 2019
|
1,148,062
|
$
|
377
|
1.4
|
||||||||
|
Cancelled
|
(625,000
|
)
|
-
|
|||||||||
|
Forfeited (1)
|
(175,000
|
)
|
(142
|
)
|
||||||||
|
Expensed (2)
|
-
|
(122
|
)
|
|||||||||
|
Nonvested at March 31, 2020
|
348,062
|
113
|
1.2
|
|||||||||
|
Granted to directors (3)
|
477,018
|
426
|
||||||||||
|
Forfeited (1)
|
(30,000
|
)
|
(24
|
)
|
||||||||
|
Vested (4)
|
(115,904
|
)
|
-
|
|||||||||
|
Expensed
|
-
|
(122
|
)
|
|||||||||
|
Nonvested at June 30, 2020
|
679,176
|
393
|
0.8
|
|||||||||
|
Granted to directors (3)
|
189,284
|
87
|
||||||||||
|
Granted to consultant (3)
|
89,286
|
38
|
||||||||||
|
Forfeited (1)
|
(91,000
|
)
|
(55
|
)
|
||||||||
|
Vested (4)
|
(189,284
|
)
|
-
|
|||||||||
|
Expensed
|
-
|
(161
|
)
|
|||||||||
|
Nonvested at September 30, 2020 (5)(6)
|
677,462
|
302
|
0.5
|
|||||||||
|
(1)
|
We reversed $0.2 million of expense recognized in prior periods on forfeited RSU shares in the amounts indicated in the unrecognized stock compensation column.
|
|
(2)
|
We expensed $0.1 million related to recognition of the unrecognized compensation associated with the cancelled RSU shares in the three months ended March 31, 2020.
|
|
(3)
|
The shares of common stock subject to the RSUs were vested when granted or vest within one year of grant, and issuance of shares thereunder is deferred to the date the holder is no longer providing
service to RiceBran Technologies.
|
|
(4)
|
Represents shares of common stock subject to RSUs which were vested when granted.
|
|
(5)
|
RSUs for a total of 450,400 shares of common stock vest in June 2021 and issuance of shares of common stock subject to each of those RSUs is deferred to the date the
holder is no longer providing service to RiceBran Technologies.
|
|
(6)
|
A total of 227,062 shares of common stock subject to the RSUs vest based upon a vesting price equal to the volume weighted average trading price of our common stock over sixty-five
consecutive trading days. Subject to a minimum service period, as described in the next sentence, the RSU shares vest as to (i) 22,706 shares on the date the vesting price equals or exceeds $5.00 per share, (ii) 68,119 shares on the
date the vesting price equals or exceeds $10.00 per share and (iii) 136,237 shares on the date the vesting price equals or exceeds $15.00 per share. Vesting on the RSU shares occurs the later of the one-year anniversary of the grant
and the date the shares reach the vesting price indicated in the preceding sentence. The RSUs expire on the fifth anniversary of each grant at dates ranging through August 2024.
|
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Warrant activity for the nine months ended September 30, 2020, follows.
|
Shares
Under
Warrants
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
||||||||||
|
Outstanding, Decembver 31, 2019
|
7,532,280
|
$
|
1.32
|
1.9
|
||||||||
|
Expired
|
(265,000
|
)
|
5.25
|
-
|
||||||||
|
Outstanding, March 31, 2020
|
7,267,280
|
1.18
|
1.7
|
|||||||||
|
Cash exercised
|
(12,948
|
)
|
0.96
|
-
|
||||||||
|
Cashless exercised (1)
|
(215,740
|
)
|
0.96
|
-
|
||||||||
|
Expired
|
(392,676
|
)
|
4.60
|
-
|
||||||||
|
Outstanding, June 30, 2020
|
6,645,916
|
$
|
0.98
|
1.7
|
||||||||
|
Outstanding, Septemeber 30, 2020 (2)
|
6,645,916
|
$
|
0.98
|
1.4
|
||||||||
|
(1)
|
In the three months ended June 30, 2020, we issued 54,629 shares of common stock upon the cashless exercise of the warrants.
|
|
(2)
|
Under the terms of certain outstanding warrants, the holders may elect to exercise the warrants under a cashless exercise feature. As of September 30, 2020, warrant holders may elect to exercise cashless
warrants for 3,484,675 shares of common stock at an exercise price of $0.96 per share and 25,000 shares of common stock at an exercise price of $5.25 per share. If we register for resale the shares subject to warrants, the holders of
some of the warrants may no longer have the right to elect a cashless exercise. If we fail to maintain a registration statement for the resale of shares under certain other warrants, the shares under those warrants may again become
exercisable using a cashless exercise feature.
|
NOTE 11. INVOLUNTARY CONVERSION OF ASSETS
In September 2020, we wrote down assets, consisting primarily of a building, machinery and equipment, in the amount of $0.9 million and incurred other costs of $0.1 million as a result of hurricane damage that occurred
in August 2020. This event damaged our Lake Charles, Louisiana property, and operations at that facility were shut down in September 2020. We expect insurance recoveries will cover our asset loss to the extent it exceeds our $0.1 million deductible
under our insurance policy. In September 2020, we received an advance on the insurance settlement of $0.3 million and we accrued a receivable for the additional $0.7 million of expected insurance proceeds related to our asset loss. The resulting
$0.1 million net loss on involuntary conversion of assets is included in selling, general and administrative expenses in our consolidated financial statements. The insurance proceeds receivable is included in other current assets on our
consolidated balance sheets. The final settlement with the insurer on this matter will likely differ from the total proceeds we estimated as of September 30, 2020. We accrue estimated insurance proceeds receivable when the proceeds are estimable
and probable of collection. Given the nature of recoveries of lost profits under business interruption insurance we have not accrued insurance proceeds receivable for any potential recoveries of lost profits under our insurance policy.
NOTE 12. INCOME TAXES
Our tax expense for the three and nine months ended September 30, 2020 and 2019, 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 September 30, 2020, 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.
Based on an analysis of tax positions taken on income tax returns filed, we have determined no material liabilities related to uncertain income tax positions exist. Although we believe the amounts reflected in our tax
returns substantially comply with applicable U.S. federal, state, and foreign tax regulations, the respective taxing authorities may take contrary positions based on their interpretation of the law. A tax position successfully challenged by a taxing
authority could result in an adjustment to our provision or benefit for income taxes in the period in which a final determination is made.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
CARES, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds
and modifications to the net interest deduction limitations. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. Except for the impact of the loan we received under the act, see Note
9, we do not anticipate that the act will have a material impact on our financial position, results of operations or cash flows.
NOTE 13. LOSS 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 RiceBran Technologies 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.
Below are reconciliations of the numerators and denominators in the EPS computations.
|
Three Months Ended September 30
|
Nine Months Ended September 30
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
NUMERATOR (in thousands):
|
||||||||||||||||
|
Basic and diluted - loss from continuing operations
|
$
|
(2,774
|
)
|
$
|
(3,326
|
)
|
$
|
(9,756
|
)
|
$
|
(9,996
|
)
|
||||
|
DENOMINATOR:
|
||||||||||||||||
|
Weighted average number of shares of shares of common stock outstanding
|
40,691,824
|
33,057,010
|
40,232,289
|
31,947,087
|
||||||||||||
|
Weighted average number of shares of common stock underlying vested restricted stock units
|
132,457
|
-
|
47,577
|
-
|
||||||||||||
|
Basic EPS - weighted average number of shares outstanding
|
40,824,281
|
33,057,010
|
40,279,866
|
31,947,087
|
||||||||||||
|
Effect of dilutive securities outstanding
|
-
|
-
|
-
|
-
|
||||||||||||
|
Diluted EPS - weighted average number of shares outstanding
|
40,824,281
|
33,057,010
|
40,279,866
|
31,947,087
|
||||||||||||
No effects of potentially dilutive securities outstanding during the three and nine months ended September 30, 2020 and 2019, were included in the calculation of diluted EPS for the three and nine months ended
September 30, 2020 and 2019, because to do so would be anti-dilutive as a result of our loss from continuing operations. Potentially dilutive securities outstanding during the periods included our outstanding convertible preferred stock, options,
warrants, nonvested restricted stock units and nonvested stock. Those potentially dilutive securities, further described in Note 10, could potentially dilute EPS in the future.
NOTE 14. FAIR VALUE MEASUREMENTS
Derivative financial instruments are carried at fair value, on a recurring basis, in accumulated OCI, and fair value is based on the quoted prices of the financial instruments (Level 1 measurements). The fair value of
cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable, commodities payable and short-term debt approximated their carrying value due to shorter maturities. As of September 30, 2020, the fair value of our
operating lease liabilities was approximately $0.2 million higher than their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements). As of September 30, 2020, the fair values of our
long-term debt and finance lease liabilities approximated their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements).
NOTE 15. COMMITMENTS AND CONTINGENCIES
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.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
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. Defense costs are expensed as incurred and are included in professional fees. 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, except for a contract dispute to be settled between July 2020 and October 2020. In the three and nine months ended September
30, 2020, we recognized $0.5 million and $0.7 million, respectively, in cost of goods sold related to the resolution of the contract dispute as it relates to contract periods through September 30, 2020.
NOTE 16. RELATED PARTY TRANSACTIONS
Our 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 25.4% 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. In March 2019, we issued and sold to CGC 666,667 shares of common stock at a purchase price
of $3.00 per share and a prefunded warrant exercisable into 1,003,344 shares of common stock for $2.99 per share, in a private placement. The prefunded warrant had an exercise price of $0.01 per share and was
immediately exercisable; however, we had to obtain approval from our shareholders before CGC could exercise the prefunded warrant to the extent such exercise would result in the holder owning in excess of 19.99% of our common shares outstanding.
CGC exercised the entire prefunded warrant automatically when our shareholders approved the exercise in June 2019.
NOTE 17. TRANSACTIONS WITH EMPLOYEES
During the three months ended March 31, 2019, we paid $1.4 million to entities owned by our former employee, Wayne Wilkison. As of September 30, 2020, and December 31, 2019, no amounts were owed to these entities.
NOTE 18. FAILURE TO COMPLY WITH NASDAQ LISTING REQUIREMENTS
On July 27, 2020, 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 must be at least
$1.00 for 10 consecutive business days. We have a period of 180 calendar days from the date of notification, or until January 25, 2021, to regain compliance. If this appears unlikely as January 25, 2021, approaches, 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.
| Item 2. |
Results of Operations
Unless otherwise noted, amounts and percentages for all periods discussed below reflect the results of operations and financial condition from our continuing operations.
Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
Revenues decreased $0.1 million in the third quarter of 2020 to $5.2 million compared to $5.3 million in the third quarter of 2019. The decrease in revenue year-over-year was due to lower revenues at our Golden Ridge
Rice Mill (Golden Ridge) operations, which ran well below capacity for most of the third quarter as we were not able to acquire sufficient rough rice to mill at an economical price. Lower revenues from Golden Ridge was partially offset by increases
in revenue from both our MGI Grain (MGI) and our RiceBran (RBT) businesses.
We experienced a gross loss of $0.8 million in the third quarter of 2020 compared to a gross loss of $0.4 million in the third quarter of 2019. The increase in gross loss was primarily attributable to Golden Ridge
due to higher input commodity prices, $0.5 million in expenses related to the resolution of contract disputes, and the impact of higher downtime during the quarter compared to the same period a year ago. Gross losses were also impacted by negative
operating leverage from a shift in product mix versus a year ago.
Selling, general and administrative (SG&A) expenses were $1.9 million in the third quarter of 2020, compared to $3.9 million in the third quarter of 2019, a decrease of $2.0 million. The decline in SG&A expense was primarily related to
initiatives to reduce overall SG&A costs, which we began enacting in the first quarter of 2020. SG&A was impacted favorably by the reversal of approximately $0.1 million in previously recognized stock compensation when unvested awards were
forfeited, offset by a $0.1 million loss due to hurricane damage to a facility in Louisiana in 2020.
Other net was $0.1 million in the third quarter of 2020 compared to other income, net, of $0.9 million in 2019. In the 2020 period, we incurred higher fees and interest expense related to the increased average
outstanding balance of our factoring facility, a new facility entered into in the fourth quarter of 2019, and on our long-term debt borrowings under agreements entered into in 2020, described further in Note 9 of the Notes to Unaudited Condensed
Consolidated Financial Statements. The 2019 period included $0.8 million gain from a settlement with the sellers of Golden Ridge which was of a nonrecurring nature.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
Revenues increased $1.5 million, or 8.4%, in the first nine months of 2020 compared to the first nine months of 2019. The increase in revenue year over year was due to higher revenues from MGI and Golden Ridge, offset
by a decline in revenue from our RBT operations. MGI was acquired in April 2019 and, therefore, our revenues included no MGI revenue in the first quarter of 2019.
We experienced a gross loss of $2.4 million in the first nine months of 2020, compared to a gross loss of $0.3 million in the first nine months of 2019. The decline in gross profit was primarily attributable to higher losses from Golden Ridge
due to sub-par milling yields, higher input commodity prices, $0.7 million in expenses related to the resolution of contract disputes, and negative operating leverage from higher downtime in the second and third quarters. Gross profits were also
negatively impacted by negative operating leverage from our RBT operations, offset in part by a higher gross profit contribution from MGI.
SG&A expenses were $7.0 million in the first nine months of 2020, compared to $10.6 million in the first nine months of 2019, a decrease of $3.6 million. The decline in SG&A expenses was primarily related to initiatives to reduce
overall SG&A costs, which we began enacting in the first quarter of 2020, as well as the absence of approximately $0.3 million in costs associated with our acquisition of Golden Ridge, and lower legal and outside accounting fees. These
reductions were offset by a $0.1 million loss due to hurricane damage to a facility in in Louisiana and a $0.3 million loss on disposition of assets in 2020.
Other net was $0.3 million in the first nine months of 2020 compared to other income, net, of $0.9 million in the first nine months of 2019. In the 2020 period, we incurred higher fees and interest expense related to
the increased average outstanding balance of our factoring facility, a new facility entered in to in the fourth quarter of 2019, and on our long-term debt borrowings under agreements entered into in 2020. The 2019 period included $0.8 million gain
from a settlement with the sellers of Golden Ridge which was of a nonrecurring nature.
COVID-19 Assessment
The United States is experiencing an outbreak of a novel coronavirus (COVID-19), which has been declared a "pandemic" by the World Health Organization.
The COVID-19 pandemic has become a worldwide health crisis that is adversely affecting the economies and financial markets of many countries, which we expect may adversely affect the demand for our
products. This pandemic also poses the risk that we or our customers, suppliers and other business partners may be disrupted or prevented from conducting business activities for certain periods of time, the durations of which are uncertain.
However, we are not able to estimate the exact magnitude of the impact of such developments on our business. The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and
spread of the outbreak within the markets in which we operate, including the related impact on our customers’ spending, all of which is highly uncertain.
In April 2020, we applied for, and received, a $1.8 million SBA Paycheck Protection Program loan as discussed further in Note 9 of the Notes to Unaudited Condensed Consolidated Financial
Statements. We believe the funds from this loan have enabled us to maintain our current workforce in light of potential economic disruptions to our business resulting from the COVID-19 outbreak.
We currently do not expect any of our facilities to be subject to government-mandated closures, and we have informed our customers that, at this time, we anticipate operating throughout the
COVID-19 outbreak. The COVID-19 outbreak has not yet caused any material disruption in the supply of raw materials used in our products or in the distribution of our products, and to date, our employees have been reporting to work, either remotely
or in-person without any material changes in attendance or productivity due to the COVID-19 outbreak. However, we cannot ensure that the COVID-19 outbreak will not cause disruptions to our business in the future.
Liquidity, Going Concern and Capital Resources
On March 30, 2020, we entered into an at market issuance sales agreement with respect to an at-the-market 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. As further discussed in Note 10 of the Notes to Unaudited Condensed Consolidated Financial Statements, we received net proceeds of $0.7
million under the agreement. As discussed further in Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements, in April 2020, we were approved for a $1.8 million SBA Payroll Protection Program loan (PPP Loan) and in
July 2020, we secured a mortgage of up to $2.0 million on our rice mill in Wynne, Arkansas. We received $1.0 million of proceeds under the mortgage in September 2020 and an additional $1.0 million in October 2020.
We used $7.3 million in operating cash during the first nine months of 2020. We used operating cash to increase our inventories by $0.8 million in anticipation of early October product shipments. We experienced a
$1.4 million reduction in accounts receivable in the first nine months of 2020 associated with the decrease in revenues at the end of the third quarter of 2020. We paid $1.1 million of capital expenditures in the first nine months of 2020. We
expect to fund the rebuilding of our building in Louisiana with proceeds from insurance. We funded our working capital needs in the nine months ended September 30, 2020 primarily with funds received from the sale of receivables under our factoring
agreement, supplemented by proceeds from the PPP loan, mortgage note and stock offering.
Management believes that despite the multi-year history of operating losses and negative operating cash flows from our continuing operations, there is no substantial doubt about our ability to continue as a going concern within one year after
the date that the financial statements are issued. The factors that alleviated this doubt include cash and cash equivalents of $3.9 million as of September 30, 2020, the resumption of operations and the end of payments to settle prior contract
disputes at our Golden Ridge facility, positive revenue and margin trends for our RiceBran and MGI operations, a nearly 50% year-over-year reduction in corporate expenses, and the ability to seek addition capital through asset-backed borrowing
arrangements and/or asset dispositions.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, other than employee contracts, that have or are likely to have a current or future material effect on our financial condition, changes in financial condition, revenue,
expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies
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. We use
authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates.
Recent Accounting Pronouncements
See Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.
| Item 3. |
Not applicable
| 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 chief executive officer, 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 chief executive officer 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, 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, 2019, 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. |
On March 30, 2020, we entered into an at market issuance sales agreement with respect to an at-the-market 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 through B. Riley FBR, Inc, as sales agent. The issuances and sales of our common stock under the agreement are made pursuant to our effective “shelf” registration statement on Form S-3. During the
three months ended September 30, 2020, we issued and sold 1,635,792 shares of common stock under the agreement, at an average price of $0.50 per share, for total proceeds of $818,929. During the quarter ended September 30, 2020, we paid the sales
agent a 5% commission totaling $40,946 and $213 of SEC and other fees. In prior quarters we paid $120,767 for legal and other fees associated with the offering, including $50,000 reimbursed the sales agent for its legal fees. The net proceeds from
this offering, after deducting the sales agent’s commissions and other offering expenses, were used for general and administrative expenses and other general corporate purposes.
| Item 3. |
None
| Item 4. |
Mine Safety Disclosures
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None
| Item 5. |
Other Information
|
None
| Item 6. |
Exhibits
|
The following exhibits are attached hereto and filed herewith:
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Incorporated by Reference
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||||||
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Exhibit
Number
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Exhibit Description
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Form
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File No.
|
|
Exhibit
Number
|
|
Filing/Effective
Date
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|
Filed
Here-with
|
|
Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on June 18, 2020
|
10-Q
|
001-36245
|
3.1
|
August 12, 2020
|
||||||||
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Mortgage Agreement and Amendment for Purchase and Sale with Republic Business Credit, LLC
|
8-K
|
001-36245
|
10.1
|
July 17, 2020
|
||||||||
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10.4 (2)
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Severance Agreement with Brent R. Rystrom
|
X
|
||||||||||
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Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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X
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||||||||
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Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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X
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||||||||
|
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Certification by CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
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|
X
|
||||||||
|
101.INS (1)
|
|
XBRL Instance Document
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|
|
X
|
|||||||
|
101.SCH (1)
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
X
|
|||||||
|
101.CAL (1)
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
X
|
|||||||
|
101.DEF (1)
|
|
XBRL Taxonomy Extension Calculation Definition Linkbase Document
|
|
|
X
|
|||||||
|
101.LAB (1)
|
|
XBRL Taxonomy Extension Calculation Label Linkbase Document
|
|
|
X
|
|||||||
|
101.PRE (1)
|
|
XBRL Taxonomy Extension Calculation Presentation Linkbase Document
|
|
|
X
|
|||||||
|
(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.
|
|
(2)
|
Indicates a management contract or compensatory plan, contract or arrangement.
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Dated: November 5, 2020
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|
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/s/ Peter G. Bradley
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Peter G. Bradley
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Executive Chairman
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/s/ Todd T. Mitchell
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Todd T. Mitchell
|
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|
|
Chief Financial Officer
|
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22