RiceBran Technologies - Quarter Report: 2020 June (Form 10-Q)
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 June 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
(State or other jurisdiction of
incorporation or organization)
|
87-0673375
(I.R.S. Employer Identification No.)
|
|
|
1330 Lake Robbins Drive, Suite 250
The Woodlands, TX
(Address of Principal Executive Offices)
|
77380
(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
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 ☒
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
|
As of July 28, 2020, shares of the registrant’s common stock outstanding totaled 40,207,398.
RiceBran Technologies
Form 10-Q
|
PART I. FINANCIAL INFORMATION
|
Page
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||
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Item 1.
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3
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||
| 3 |
|||
| 4 |
|||
| 5 |
|||
| 6 | |||
| 7 | |||
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Item 2.
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18
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||
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Item 3.
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20
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||
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Item 4.
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20
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||
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PART II. OTHER INFORMATION
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|||
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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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||
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Item 2.
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20
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||
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Item 3.
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21
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||
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Item 4.
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21
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||
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Item 5.
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21
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||
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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.
PART I. FINANCIAL INFORMATION
RiceBran Technologies
Three and Six Months Ended June 30, 2020 and 2019
(Unaudited) (in thousands, except share and per share amounts)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Revenues
|
$
|
5,903
|
$
|
6,219
|
$
|
14,233
|
$
|
12,583
|
||||||||
|
Cost of goods sold
|
7,127
|
6,463
|
15,862
|
12,484
|
||||||||||||
|
Gross profit (loss)
|
(1,224
|
)
|
(244
|
)
|
(1,629
|
)
|
99
|
|||||||||
|
Selling, general and administrative expenses
|
2,615
|
3,422
|
5,165
|
6,763
|
||||||||||||
|
Operating loss
|
(3,839
|
)
|
(3,666
|
)
|
(6,794
|
)
|
(6,664
|
)
|
||||||||
|
Other income (expense):
|
||||||||||||||||
|
Interest income
|
8
|
23
|
19
|
23
|
||||||||||||
|
Interest expense
|
(76
|
)
|
(19
|
)
|
(125
|
)
|
(31
|
)
|
||||||||
|
Other expense
|
(42
|
)
|
(3
|
)
|
(87
|
)
|
(4
|
)
|
||||||||
|
Other income
|
-
|
6
|
5
|
6
|
||||||||||||
|
Total other income (expense), net
|
(110
|
)
|
7
|
(188
|
)
|
(6
|
)
|
|||||||||
|
Loss before income taxes
|
(3,949
|
)
|
(3,659
|
)
|
(6,982
|
)
|
(6,670
|
)
|
||||||||
|
Income tax benefit
|
-
|
-
|
-
|
-
|
||||||||||||
|
Loss from continuing operations
|
(3,949
|
)
|
(3,659
|
)
|
(6,982
|
)
|
(6,670
|
)
|
||||||||
|
Loss from discontinued operations
|
-
|
-
|
-
|
(216
|
)
|
|||||||||||
|
Net loss
|
$
|
(3,949
|
)
|
$
|
(3,659
|
)
|
$
|
(6,982
|
)
|
$
|
(6,886
|
)
|
||||
|
Basic loss per common share:
|
||||||||||||||||
|
Continuing operations
|
$
|
(0.10
|
)
|
$
|
(0.11
|
)
|
$
|
(0.17
|
)
|
$
|
(0.21
|
)
|
||||
|
Discontinued operations
|
-
|
-
|
-
|
(0.01
|
)
|
|||||||||||
|
Basic loss per common share
|
$
|
(0.10
|
)
|
$
|
(0.11
|
)
|
$
|
(0.17
|
)
|
$
|
(0.22
|
)
|
||||
|
Diluted loss per common share:
|
||||||||||||||||
|
Continuing operations
|
$
|
(0.10
|
)
|
$
|
(0.11
|
)
|
$
|
(0.17
|
)
|
$
|
(0.21
|
)
|
||||
|
Discontinued operations
|
-
|
-
|
-
|
(0.01
|
)
|
|||||||||||
|
Diluted loss per common share
|
$
|
(0.10
|
)
|
$
|
(0.11
|
)
|
$
|
(0.17
|
)
|
$
|
(0.22
|
)
|
||||
|
Weighted average number of shares outstanding:
|
||||||||||||||||
|
Basic
|
40,052,163
|
33,204,332
|
40,007,660
|
31,382,927
|
||||||||||||
|
Diluted
|
40,052,163
|
33,204,332
|
40,007,660
|
31,382,927
|
||||||||||||
See Notes to Unaudited Condensed Consolidated Financial Statements
RiceBran Technologies
Three and Six Months Ended June 30, 2020 and 2019
(Unaudited) (in thousands, except share and per share amounts)
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Net loss
|
$
|
(3,949
|
)
|
$
|
(3,659
|
)
|
$
|
(6,982
|
)
|
$
|
(6,886
|
)
|
||||
|
Derivative financial instruments designated as cash flow hedges:
|
||||||||||||||||
|
Losses arising during the period
|
(100
|
)
|
-
|
(100
|
)
|
-
|
||||||||||
|
Reclassification of losses realized to cost of goods sold
|
52 |
- |
52
|
-
|
||||||||||||
|
Net other comprehensive loss
|
(48
|
)
|
-
|
(48
|
)
|
-
|
||||||||||
|
Comprehensive loss
|
$
|
(3,997
|
)
|
$
|
(3,659
|
)
|
$
|
(7,030
|
)
|
$
|
(6,886
|
)
|
||||
See Notes to Unaudited Condensed Consolidated Financial Statements
RiceBran Technologies
(Unaudited) (in thousands, except share amounts)
|
June 30,
2020 |
December 31,
2019 |
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
3,347
|
$
|
8,444
|
||||
|
Accounts receivable, net of allowance for doubtful accounts of $24 and $347
|
2,718
|
3,738
|
||||||
|
Inventories
|
2,009
|
898
|
||||||
|
Other current assets
|
1,392
|
691
|
||||||
|
Total current assets
|
9,466
|
13,771
|
||||||
|
Property and equipment, net
|
18,523
|
19,077
|
||||||
|
Operating lease right-of-use assets
|
2,604
|
2,752
|
||||||
|
Goodwill
|
3,915
|
3,915
|
||||||
|
Intangible assets
|
833
|
950
|
||||||
|
Other long-term assets
|
-
|
27
|
||||||
|
Total assets
|
$
|
35,341
|
$
|
40,492
|
||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$
|
949
|
$
|
833
|
||||
|
Commodities payable
|
198
|
829
|
||||||
|
Accrued salary, wages and benefits
|
1,051
|
877
|
||||||
|
Accrued expenses
|
473
|
884
|
||||||
|
Customer prepayments
|
-
|
12
|
||||||
|
Operating lease liabilities, current portion
|
325
|
309
|
||||||
|
Due under insurance premium finance agreements
|
307
|
116
|
||||||
|
Due under factoring agreement
|
2,053
|
1,823
|
||||||
|
Finance lease liabilities, current portion
|
96
|
101
|
||||||
|
Long-term debt, current portion
|
29
|
28
|
||||||
|
Total current liabilities
|
5,481
|
5,812
|
||||||
|
Operating lease liabilities, less current portion
|
2,474
|
2,674
|
||||||
|
Finance lease liabilities, less current portion
|
150
|
190
|
||||||
|
Long-term debt, less current portion
|
1,847
|
73
|
||||||
|
Total liabilities
|
9,952
|
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, 40,207,398 shares and 40,074,483 shares, issued and outstanding
|
319,487
|
318,811
|
||||||
|
Accumulated deficit
|
(294,162
|
)
|
(287,180
|
)
|
||||
|
Accumulated other comprehensive loss
|
(48
|
)
|
-
|
|||||
|
Total shareholders’ equity
|
25,389
|
31,743
|
||||||
|
Total liabilities and shareholders’ equity
|
$
|
35,341
|
$
|
40,492
|
||||
See Notes to Unaudited Condensed Consolidated Financial Statements
RiceBran Technologies
Six Months Ended June 30, 2020 and 2019
(Unaudited) (in thousands)
|
2020
|
2019
|
|||||||
|
Cash flow from operating activities:
|
||||||||
|
Net loss
|
$
|
(6,982
|
)
|
$
|
(6,886
|
)
|
||
|
Loss from discontinued operations
|
-
|
216
|
||||||
|
Loss from continuing operations
|
(6,982
|
)
|
(6,670
|
)
|
||||
|
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities
|
||||||||
|
Depreciation
|
1,157
|
853
|
||||||
|
Amortization
|
117
|
20
|
||||||
|
Stock and share-based compensation
|
664
|
643
|
||||||
|
Loss on disposition of property and equipment
|
308
|
-
|
||||||
|
Other
|
(107
|
)
|
(2
|
)
|
||||
|
Changes in operating assets and liabilities, net of impact of acquisitions:
|
||||||||
|
Accounts receivable
|
1,090
|
(774
|
)
|
|||||
|
Inventories
|
(1,111
|
)
|
(5
|
)
|
||||
|
Accounts payable and accrued expenses
|
(201
|
)
|
(348
|
)
|
||||
|
Commodities payable
|
(631
|
)
|
(768
|
)
|
||||
|
Other
|
(675
|
)
|
(398
|
)
|
||||
|
Net cash used in operating activities
|
(6,371
|
)
|
(7,449
|
)
|
||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment
|
(843
|
)
|
(2,319
|
)
|
||||
|
Acquisition of MGI
|
-
|
(3,795
|
)
|
|||||
|
Net cash used in investing activities
|
(843
|
)
|
(6,114
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Payments on factoring agreement
|
(14,946
|
)
|
-
|
|||||
|
Advances on factoring agreement
|
15,131
|
-
|
||||||
|
Advances on insurance premium finance agreements
|
506
|
418
|
||||||
|
Payments on insurance premium finance agreements
|
(316
|
)
|
(138
|
)
|
||||
|
Advances on debt and finance lease liabilities
|
1,792
|
-
|
||||||
|
Payments on debt and finance lease liabilities
|
(62
|
)
|
(302
|
)
|
||||
|
Proceeds from common stock warrant exercises
|
12
|
1,990
|
||||||
|
Proceeds from common stock option exercises
|
-
|
147
|
||||||
|
Proceeds from issuance of common stock and pre-funded warrant, net of issuance costs
|
-
|
11,593
|
||||||
|
Net cash provided by financing activities
|
2,117
|
13,708
|
||||||
|
Net change in cash and cash equivalents and restricted cash
|
$
|
(5,097
|
)
|
$
|
145
|
|||
|
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
|
3,347
|
7,189
|
||||||
|
Restricted cash
|
-
|
225
|
||||||
|
Cash and cash equivalents and restricted cash, end of period
|
3,347
|
7,414
|
||||||
|
Net change in cash and cash equivalents and restricted cash
|
$
|
(5,097
|
)
|
$
|
145
|
|||
|
Supplemental disclosures:
|
||||||||
|
Cash paid for interest
|
$
|
79
|
$
|
43
|
||||
|
Cash paid for income taxes
|
$
|
-
|
$
|
-
|
||||
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.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
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.
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 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 six months ended June 30, 2019, as if the MGI acquisition had occurred January 1, 2019.
|
Three Months Ended
June 30, 2019
|
Six Months Ended
June 30, 2019
|
|||||||
|
Revenues (in thousands)
|
$
|
6,277
|
$
|
13,783
|
||||
|
Loss from continuing operations (in thousands)
|
$
|
(3,803
|
)
|
$
|
(6,539
|
)
|
||
|
Loss per share - continuing operations
|
$
|
(0.11
|
)
|
$
|
(0.21
|
)
|
||
|
Weighted average number of common shares outstanding - basic and diluted
|
33,204,332
|
31,382,927
|
||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
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, 2018, or of our future operating results.
NOTE 5. CASH AND CASH EQUIVALENTS
As of June 30, 2020, we have $2.0 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.
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 six months ended June 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 |
|
|||||||
|
% of revenues, three months ended June 30, 2020
|
10
|
%
|
8
|
%
|
3
|
%
|
||||||
|
% of revenues, three months ended June 30, 2019
|
10
|
%
|
14
|
%
|
1
|
%
|
||||||
|
% of revenues, six months ended June 30, 2020
|
9
|
%
|
13
|
%
|
2
|
%
|
||||||
|
% of revenues, six months ended June 30, 2019
|
10
|
%
|
16
|
%
|
1
|
%
|
||||||
|
% of accounts receivable, as of June 30, 2020
|
14
|
%
|
32
|
%
|
8
|
%
|
||||||
|
% of accounts receivable, as of December 31, 2019
|
10
|
%
|
31
|
%
|
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 June 30
|
Six Months Ended June 30
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Food
|
$
|
3,967
|
$
|
4,365
|
$
|
10,159
|
$
|
9,112
|
||||||||
|
Animal nutrition
|
|
1,936
|
1,854
|
4,074
|
3,471
|
|||||||||||
|
Revenues
|
$
|
5,903
|
$
|
6,219
|
$
|
14,233
|
$
|
12,583
|
||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 7. INVENTORIES
The following table details the components of inventories (in thousands).
|
June 30,
2020
|
December 31,
2019
|
|||||||
|
Finished goods
|
$
|
1,799
|
$
|
698
|
||||
|
Raw materials
|
80
|
90
|
||||||
|
Packaging
|
130
|
110
|
||||||
|
Inventories
|
$
|
2,009
|
$
|
898
|
||||
NOTE 8. LEASES
The components of lease expense and cash flows from leases (in thousands) follow.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
Finance lease cost:
|
||||||||||||||||
|
Amortization of right-of use assets, included in cost of goods sold
|
$
|
20
|
$
|
14
|
$
|
41
|
$
|
18
|
||||||||
|
Interest on lease liabilities
|
4
|
2
|
8
|
4
|
||||||||||||
|
Operating lease cost, included in selling, general and administrative expenses:
|
||||||||||||||||
|
Fixed leases cost
|
131
|
131
|
261
|
261
|
||||||||||||
|
Variable lease cost
|
33
|
32
|
48
|
64
|
||||||||||||
|
Short-term lease cost
|
-
|
7
|
3
|
16
|
||||||||||||
|
Total lease cost
|
$
|
188
|
$
|
186
|
$
|
361
|
$
|
363
|
||||||||
|
Cash paid for amounts included in the measurement of lease liabilities:
|
||||||||||||||||
|
Operating cash flows from finance leases
|
$
|
4
|
$
|
3
|
$
|
8
|
$
|
5
|
||||||||
|
Operating cash flows from operating leases
|
$
|
131
|
$
|
131
|
$
|
261
|
$
|
261
|
||||||||
|
Financing cash flows from finance leases
|
$
|
20
|
$
|
20
|
$
|
46
|
$
|
31
|
||||||||
As of June 30, 2020, variable lease payments do not depend on a rate or index. As of June 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 June 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 June 30, 2020, follows.
|
Operating
Leases
|
Finance
Leases
|
|||||||
|
Remaining leases terms (in years)
|
3.3-12.7
|
0.6-4.0
|
||||||
|
Weighted average remaining lease terms (in years)
|
7.3
|
2.9
|
||||||
|
Discount rates
|
6.3%-9.0
|
%
|
4.3%-7.3
|
%
|
||||
|
Weighted average discount rate
|
7.6
|
%
|
5.8
|
%
|
||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Maturities of lease liabilities as of June 30, 2020, follows (in thousands).
|
Operating
Leases |
Finance
Leases
|
|||||||
|
2020 (six months ended December 31, 2020)
|
$ |
232
|
$ |
62
|
||||
|
2021
|
536
|
91
|
||||||
|
2022
|
548
|
68
|
||||||
|
2023
|
528
|
38
|
||||||
|
2024
|
428
|
11
|
||||||
|
Thereafter
|
1,469
|
-
|
||||||
|
Total lease payments
|
3,741
|
270
|
||||||
|
Amounts representing interest
|
(942
|
)
|
(24
|
)
|
||||
|
Present value of lease obligations
|
$
|
2,799
|
$
|
246
|
||||
NOTE 9. DEBT
In the three and six months ended June 30, 2020, we financed amounts owed for annual insurance premiums under financing agreements, due in monthly installments of principal and interest through January 2021, at
interest rates of 4.7% to 5.5% per year.
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 six months ended June 30, 2020, we expensed $0.1 million and $0.2 million of interest and fees under the agreement, fees incurred averaged 4.4% (exclusive of deferred cost amortization) and interest averaged 3.2% of
the amounts outstanding under the facility. During the three and six months ended June 30, 2020, outstanding borrowings under the agreement averaged $2.9 million and $2.0 million per day. Amortization of debt issuance costs in the three and six
months ended June 30, 2020, was less than $0.1 million. The lender has the right to demand repayment of the advances at any time. The lender has a security interest in our personal property assets.
Due under factoring agreement consists of the following (in thousands).
|
June 30,
2020 |
December 31,
2019 |
|||||||
|
Borrowings outstanding
|
$
|
2,174
|
$
|
1,989
|
||||
|
Debt issuance costs, net
|
(121
|
)
|
(166
|
)
|
||||
|
Due under factoring agreement
|
$
|
2,053
|
$
|
1,823
|
||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Long-term debt consists of the following (in thousands).
|
June 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
|
$ |
-
|
||||
|
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.
|
47
|
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 .
|
37
|
39
|
||||||
|
Total long term debt
|
$
|
1,876
|
$
|
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 after eight weeks as long as we use the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains payroll levels. The amount of loan forgiveness will
be reduced if we terminate employees or reduce salaries during the eight-week period. The unforgiven portion of the loan is payable over two years at an interest rate of 1.0%, with a deferral of payments for the first six months. We intend to use
the proceeds for purposes consistent with the program. While we currently believe that our use of the loan proceeds will meet the conditions for forgiveness of the loan, 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. Under this promissory note we may borrow up to the lesser of (i) $2.0 million or (ii) 65% of the appraised value of our rice mill in Wynne, Arkansas
which is securing our obligations under the promissory note. Interest 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. We may request advances under the agreement through October 2020. The principal advances must be repaid in monthly installments ending in June 2022. Any obligations that we incur under the promissory note will
be secured by certain real property and personal property assets.
NOTE 10. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS
In June 2020, 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
|
|||||||||||||||||||||
|
Commn 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
|
||||||||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
|
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
|
|||||||||||||
|
Proceeds from 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
|
|||||||||||||
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 issuance and sale, if any, of our common stock under the agreement will be made pursuant to our effective “shelf” registration statement on Form S-3. No
sales were made to date under this agreement. We have deferred $0.1 million of legal expenses and other costs related to the offering which are included in other current assets in our consolidated balance sheets as of June 30, 2020.
Share-based compensation by type of award follows (in thousands).
|
Three Months Ended
|
||||||||
|
June 30, 2020
|
March 31, 2020
|
|||||||
|
Common stock, vested at issuance and nonvested at issuance
|
$
|
95
|
$
|
105
|
||||
|
Stock options
|
99
|
85
|
||||||
|
Restricted stock units
|
122
|
122
|
||||||
|
Compensation expense related to common stock awards issued under equity incentive plan
|
$
|
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 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. As of June 30, 2020, there was no shares of nonvested common stock outstanding. 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.
Stock option activity for the six months ended June 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
|
||||||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
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.
Restricted stock unit (RSU) activity for the six months ended June 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
|
(30,000
|
)
|
(24
|
)
|
||||||||
|
Vested (4)
|
(115,904
|
)
|
-
|
|||||||||
|
Expensed
|
-
|
(122
|
)
|
|||||||||
|
Nonvested at June 30, 2020 (5)(6)
|
679,176
|
$
|
393
|
0.8
|
||||||||
| (1) |
In the three months ended March 31, 2020, we reversed $0.1 million of expense recognized prior to January 1, 2020 on forfeited RSU shares.
|
| (2) |
We expensed $0.1 million related to recognition of the unrecognized compensation associated with the cancelled RSU shares.
|
| (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 361,114 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 318,062 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) 31,806 shares on the date the vesting price equals or exceeds $5.00 per share (ii) 95,419 shares the date the vesting price equals or
exceeds $10.00 per share and (iii) 190,837 shares 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.
|
Warrant activity for the six months ended June 30, 2020, follows.
|
Shares
Under
Warrants
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life (Years) |
||||||||||
|
Outstanding, December 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 (2)
|
6,645,916
|
$
|
0.98
|
1.7
|
||||||||
| (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 June 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 average 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.
|
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 11. INCOME TAXES
Our tax expense for the three and six months ended June 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 June 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.
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 12. 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 June 30
|
Six Months Ended June 30
|
|||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
|||||||||||||
|
NUMERATOR (in thousands):
|
||||||||||||||||
|
Basic and diluted - loss from continuing operations
|
$
|
(3,949
|
)
|
$
|
(3,659
|
)
|
$
|
(6,982
|
)
|
$
|
(6,670
|
)
|
||||
|
DENOMINATOR:
|
||||||||||||||||
|
Weighted average number of shares of shares of common stock outstanding
|
40,041,888
|
33,204,332
|
40,002,522
|
31,382,927
|
||||||||||||
|
Weighted average number of shares of common stock underlying vested restricted stock units
|
10,275
|
-
|
5,138
|
-
|
||||||||||||
|
Basic EPS - weighted average number of shares outstanding
|
40,052,163
|
33,204,332
|
40,007,660
|
31,382,927
|
||||||||||||
|
Effect of dilutive securities outstanding
|
-
|
-
|
-
|
-
|
||||||||||||
|
Diluted EPS - weighted average number of shares outstanding
|
40,052,163
|
33,204,332
|
40,007,660
|
31,382,927
|
||||||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
No effects of potentially dilutive securities outstanding during the three and six months ended June 30, 2020 and 2019, were included in the calculation of diluted EPS for the three and six months ended June 30, 2020
and 2019 because to do so would be anti-dilutive as a results 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 13. DERIVATIVE FINANCIAL INSTRUMENTS
As of June 30, 2020, our outstanding derivative financial instruments consist of commodity futures which trade on a major exchange. As of June 30, 2020, other current assets include a $0.5 million
receivable representing our margin account with a broker. We are potentially exposed to credit risk under the futures but not for the notional amounts. We are exposed to credit risk to the extent the open futures are in an asset position. At June
30, 2020, the fair value of open futures was a negative $48 thousand (recorded in accumulated OCI) and, therefore, we had no credit risk associated with those open derivative financial instruments.
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 June 30, 2020, the fair values of our operating
lease liabilities was approximately $0.1 million higher than their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements). As of June 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.
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 settled in July 2020 for $0.2 million. In the three months ended June 30, 2020, we included $0.2 million in cost of
goods sold and as of June 30, 2020, included a $0.2 million liability in our consolidated financial statements for this matter. The liability was net against accounts receivable under a right of offset.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
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 26.5% 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 six months ended June 30, 2019, and three months ended March 31, 2019, we paid $1.4 million to entities owned by our former employee, Wayne Wilkison. As of June 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 List 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. Nasdaq rules allow for a compliance period of 180 calendar days, or until January 25, 2021 in which 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.
NOTE 19. SUBSEQUENT EVENTS
On August 11, 2020, RiceBran Technologies and Mr. Brent Rystrom entered into a separation and release agreement which provides that, effective August 14, 2020, Mr. Rystrom resigns as our employee, chief executive officer, and director. We
will retain Mr. Rystrom as a consultant through December 31, 2020, and Mr. Rystrom will receive medical and insurance benefits during this period.
On August 11, 2020, our board of directors appointed Peter G. Bradley to the role of executive chairman effective August 14, 2020. In this role, Mr. Bradley will oversee our day-to-day operations as well as coordinate a review of strategic
alternatives. Mr. Bradley is a global business leader with more than 23 years of experience as an executive in various food and ingredients businesses. Most recently, Mr. Bradley has been a principal at Ingredient Insights, a strategic
consultant focused on food ingredients and is currently an operating partner at Arbor Investments, a private equity firm that focuses exclusively on acquiring premier companies in the food, beverage and related industries.
On August 11, 2020, our board of directors appointed Brent Rosenthal to serve in the capacity of lead independent director effective August 14, 2020.
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 June 30, 2020 Compared to Three Months Ended June 30, 2019
Revenues decreased $0.3 million in the second quarter of 2020 compared to the second quarter of 2019. The decrease in revenue year over year was due to lower revenues from our RiceBran operations partially offset by
an increase in revenue from MGI Grain (MGI). Revenue for Golden Ridge Rice Mill (Golden Ridge) was also down modestly from a year ago, as higher daily production levels were offset by a slowdown in production at the mill for six weeks in the second
quarter as we were not able to acquire sufficient rough rice to mill at an economical price. By type, animal feed product revenues increased 4%, while food product revenues decreased by 9%. The increase in animal feed products revenue was a shift in
product revenue from food to animal feed products at RBT. The decrease in food product revenue reflects the product mix at RBT combined with lower revenues at the Golden Ridge facility.
We experienced a gross loss of $1.2 million in the second quarter of 2020 compared to a gross loss of $0.2 million in the second quarter of 2019. The increase in gross loss was primarily attributable to negative
operating leverage from our RiceBran operations as a result of lower volumes versus a year ago. Gross losses from Golden Ridge also increased from the same period a year ago due to higher input commodity prices and negative operating leverage from a
slowdown in production at the mill for six weeks in the second quarter.
Selling, general and administrative (SG&A) expenses were $2.6 million in the second quarter of 2020, compared to $3.4 million in the second quarter of 2019, a decrease of $0.8 million. The decline in SG&A
expense was primarily related to benefits from initiatives enacted in the first quarter of 2020 to reduce overall SG&A costs.
Other expense increased $0.1 million in the second quarter of 2020 compared to the second quarter of 2019. This increase was primarily due to 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.
Six Months Ended June 30, 2020, Compared to Six Months Ended June 30, 2019
Revenues increased $1.6 million, or 13.1%, in the first half of 2020 compared to the first half of 2019. The increase in revenue year over year was due to higher revenues from Golden Ridge and MGI, offset by a decline
in revenue from our RiceBran operations. MGI was acquired in April 2019 and, therefore, our revenues included no MGI revenue in the first quarter of 2019. By type, animal feed product revenues increased by 17%, while food product revenues increased
11% year over year, primarily due to higher sales of finished rice from Golden Ridge, and the additional revenue from MGI for the first three months of 2020. During the first six months of 2020, RBT operations provided higher animal food revenue;
however, this was offset by lower revenue from human food products.
We experienced a gross loss of $1.6 million in the first half of 2020, compared to a gross profit of $0.1 million in the first half of 2019. The decline in gross profit was primarily attributable to higher losses from
Golden Ridge due to sub-par milling yields, an unfavorable spread on certain contracts due to higher input commodity prices as a result of delays in fulfillment, and negative operating leverage from a slowdown in production at the mill for six weeks
in the second quarter. Gross profits were also negatively impacted by negative operating leverage from our RiceBran operations in the second quarter. This decline was offset in part by a higher gross profit contribution from MGI.
SG&A expenses were $5.2 million in the first six months of 2020, compared to $6.8 million in the first six months of 2019, a decrease of $1.6 million. The decline in SG&A expense was primarily related to the
absence of approximately $0.3 million in costs associated with our acquisition of Golden Ridge in the comparable period a year ago, lower legal and outside accounting fees, as well the initial benefits from initiatives to reduce overall SG&A
costs.
Other expense increased $0.2 million in the first six months of 2020 compared to the first six months of 2019. This increase was primarily due to 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.
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 anticipate the funds from this loan will enable us to maintain our current workforce during any economic disruptions to our business as a result of 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. 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.
Liquidity and Capital Resources
We used $6.4 million in operating cash during the 2020 first half. In the first half of 2020 we used operating cash to (i) increase our inventories in anticipation of a seasonal shut down of our Louisiana facilities
for part of the second and third quarters, (ii) fund a $0.5 million margin account, carried in other current assets in our consolidated balance sheets, in connection with the commodities hedging program we began in the second quarter of 2020, and
(iii) pay down commodities payable $0.6 million with no offset for incoming purchases due to lack of rough rice. We experienced a $1.1 million reduction in accounts receivable associated with the decrease in revenues at the end of the second quarter
of 2020. We paid $0.8 million of capital expenditures in the first half of 2020. We funded our working capital needs in the first half of 2020, primarily with a reduction in our cash reserves and proceeds from the PPP loan.
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 of the date of this filing, we have not sold any shares of our common stock pursuant to this program. 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. Management
believes the COVID-19 outbreak has created general market uncertainty which may currently limit the company’s ability to seek external sources of funding for investment initiatives and/or general operations. However, with these sources of funds, as
of the date of this filing, management believes we have sufficient capital reserves and borrowing capacity to maintain our workforce and fund the operations of the business through the remainder of the COVID-19 outbreak and until such time as market
conditions normalize.
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.
Not applicable
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
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.
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.
During the quarter ended June 30, 2020, we issued the securities described below without registration under the Securities Act. 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.
In the three months ended June 30, 2020, we issued 54,629 shares of common stock upon cashless exercise of warrants for the purchase of up to 215,740 shares of common stock at an exercise price of $0.96 per share.
In the three months ended June 30, 2020, we issued 12,948 shares of common stock upon the cash exercise of a warrant for the purchase of up to 12,948 shares of common stock at an exercise price of $0.96 per share.
On 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.
None
None
None
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
|
|
Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on June 18, 2020
|
X
|
|||||||||||
|
Promissory Note dated as of April 15, 2020
|
8-K
|
001-36245
|
10.1
|
April 16, 2020
|
||||||||
|
Amended and Restated 2014 Equity Incentive Plan (2)
|
8-K
|
001-36245
|
10.2
|
July 17, 2020
|
||||||||
|
Form of Award of Deferred and Restricted Stock Units for 2014 Equity Incentive Plan (2)
|
8-K
|
001-36245
|
10.3
|
July 17, 2020
|
||||||||
|
|
Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
X
|
||||||||
|
|
Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
X
|
||||||||
|
|
Certification by CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
X
|
||||||||
|
101.INS (1)
|
|
XBRL Instance Document
|
|
|
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
|
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| (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.
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Indicates a management contract or compensatory plan, contract or arrangement.
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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.
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Dated: August 12, 2020
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/s/ Brent R. Rystrom
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Brent R. Rystrom
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Director and Chief Executive Officer
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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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