SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended | |
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from __________ to __________ |
Commission File Number
RiceBran Technologies
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| | | The |
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.
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).
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 ☐ | 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
As of November 3, 2022, there were
RiceBran Technologies
Form 10-Q
Cautionary Note about Forward-Looking Statements
This quarterly report on Form 10-Q contains “forward-looking statements” concerning our operations, economic performance and financial condition. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue, liquidity or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services, products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. The forward-looking statements contained herein reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Actual results may differ materially from those projected in such forward-looking statements due to a number of factors, risks and uncertainties, including the factors that may affect future results set forth in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. Forward-looking statements speak only as of the date on which they are made, and 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
Condensed Consolidated Statements of Operations
(Unaudited) (in thousands, except share and per share amounts)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues |
$ | $ | $ | $ | ||||||||||||
| Cost of goods sold |
||||||||||||||||
| Gross profit (loss) |
( |
) | ( |
) | ( |
) | ||||||||||
| Selling, general and administrative expenses |
||||||||||||||||
| Loss (gain) on involuntary conversion of property and equipment |
( |
) | ( |
) | ||||||||||||
| Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest income |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Change in fair value of derivative warrant liability |
||||||||||||||||
| Gain on extinguishment of PPP loan |
||||||||||||||||
| Other expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income |
||||||||||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense |
( |
) | ( |
) | ( |
) | ||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Loss per common share: |
||||||||||||||||
| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of shares outstanding: |
||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
||||||||||||||||
See Notes to Unaudited Condensed Consolidated Financial Statement
Condensed Consolidated Balance Sheets
(Unaudited) (in thousands, except share amounts)
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $ and $ | ||||||||
| Inventories | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Commodities payable | ||||||||
| Accrued salary, wages and benefits | ||||||||
| Accrued expenses | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Due under bank line of credit | ||||||||
| Due under factoring agreement, including the Over-advance | ||||||||
| Due under insurance premium finance agreements | ||||||||
| Finance lease liabilities, current portion | ||||||||
| Long-term debt, current portion | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Finance lease liabilities, less current portion | ||||||||
| Long-term debt, less current portion | ||||||||
| Derivative warrant liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders' equity: | ||||||||
| Preferred stock, shares authorized: Series G, convertible, shares authorized, stated value $, shares, issued and outstanding | ||||||||
| Common stock, par value, shares authorized, shares and shares, issued and outstanding | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
See Notes to Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Cash Flows
(Unaudited) (in thousands)
| Nine Months Ended September 30, |
||||||||
| 2022 |
2021 |
|||||||
| Cash flow from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities |
||||||||
| Depreciation |
||||||||
| Amortization |
||||||||
| Stock and share-based compensation |
||||||||
| Change in fair value derivative warrant liability |
( |
) | ||||||
| Loss (gain) on involuntary conversion of property and equipment |
( |
) | ||||||
| Gain on extinguishment of PPP loan |
( |
) | ||||||
| Provision for bad debts |
||||||||
| Other |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventories |
( |
) | ( |
) | ||||
| Accounts payable and accrued expenses |
||||||||
| Commodities payable |
||||||||
| Other |
( |
) | ( |
) | ||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Proceeds from insurance on involuntary conversion |
||||||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
||||||||
| Advances on factoring agreement, including the Over-advance |
||||||||
| Payments on factoring agreement |
( |
) | ( |
) | ||||
| Advances on bank line of credit |
||||||||
| Payments on bank line of credit |
( |
) | ||||||
| Advances on insurance premium finance agreements |
||||||||
| Payments on insurance premium finance agreements |
( |
) | ( |
) | ||||
| Payments on long-term debt and finance lease liabilities |
( |
) | ( |
) | ||||
| Proceeds from issuances of common stock and warrants, net of costs |
||||||||
| Proceeds from common stock warrant exercises |
||||||||
| Net cash provided by financing activities |
||||||||
| Net change in cash and cash equivalents |
$ | ( |
) | $ | ||||
| Cash and cash equivalents, beginning of period |
$ | $ | ||||||
| Cash and cash equivalents, end of period |
||||||||
| Net change in cash and cash equivalents |
$ | ( |
) | $ | ||||
| Supplemental disclosures: |
||||||||
| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
$ | $ | ||||||
See Notes to Unaudited Condensed Consolidated Financial Statements
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
In the opinion of management, the accompanying unaudited condensed consolidated financial statements (interim financial statements) of RiceBran Technologies and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the Securities and Exchange Commission (the SEC) for reporting on Form 10-Q; therefore, they do not include all of the information and notes required by GAAP for complete financial statements. The interim financial statements contain all adjustments necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented of a normal and recurring nature necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented.
These interim financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021, which included all disclosures required by generally accepted accounting principles.
The results reported in these interim financial statements are not necessarily indicative of the results to be expected for the full fiscal year, or any other future period, and have been prepared based on the realization of assets and the satisfaction of liabilities in the normal course of business.
In August 2022, our board of directors approved a 1 for
Certain reclassifications have been made to amounts reported for the prior periods to achieve consistent presentation with the current period. Such reclassifications had no impact on previously reported net loss or shareholders’ equity.
NOTE 2. BUSINESS
We are a specialty ingredient company focused on the development, production, and marketing of products derived from traditional and ancient small grains. We create and produce products utilizing proprietary processes to deliver improved nutrition, ease of use, and extended shelf-life, while addressing consumer demand for all natural, non-GMO and organic products. We believe our products can become valuable alternatives to traditional food ingredients.
Notably, we apply our proprietary technologies to convert raw rice bran into stabilized rice bran (SRB), and high value-added derivative products including: RiBalance, a rice bran nutritional package derived from SRB; RiSolubles, a nutritious, carbohydrate and lipid rich fraction of RiBalance; RiFiber, a fiber rich insoluble derivative of RiBalance and ProRyza, a rice bran protein-based product; and a variety of other valuable derivatives extracted from these core products.
In granular form, SRB is a food additive used in products for human and animal consumption. We believe SRB has certain qualities that make it more attractive than additives based on the by-products of other agricultural commodities, such as corn, soybeans, wheat, and yeast. Our SRB products and SRB derivatives support the production of healthy, natural, hypoallergenic, gluten free, and non-genetically modified ingredients and supplements for use in meats, baked goods, cereals, coatings, health foods, and high-end animal nutrition. Our target customers are food and animal nutrition manufacturers, wholesalers and retailers, both domestically and internationally.
We manufacture and distribute SRB from
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent accounting standards not yet adopted
The following discusses the accounting standard(s) not yet adopted that will, or are expected to, result in a significant change in practice and/or have a significant financial impact on our financial position, results of operations or cash flows.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
In June 2016, the Financial Accounting Standards Board (FASB) issued guidance ASU No. 2016-13 Financial 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 we must adopt the guidance on a modified retrospective approach through cumulative-effect adjustment to retained earnings as of January 1, 2023. Based on the nature of our current receivables and our credit loss history, we do not expect the adoption of the guidance to have a significant impact on our results of operations, financial position, or cash flows.
NOTE 4. CASH AND CASH EQUIVALENTS
As of September 30, 2022, we have $
We have cash on deposit in excess of federally insured limits at a bank. We do not believe that maintaining substantially all such assets with the bank or investing in a liquid mutual fund represent material risks.
NOTE 5. ACCOUNTS RECEIVABLE AND REVENUES
Amounts billed and due from our customers are classified as accounts receivable on our consolidated balance sheets and require payment on a short-term basis. Invoices are generally issued at the point control transfers and substantially all of our invoices are due within 30 days or less, however certain customers have terms of up to 120 days. For substantially all of our contracts, control of the ordered product(s) transfers at our location. Periodically, we require payment prior to the point in time we recognize revenue. We classify amounts received from customers prior to revenue recognition on a contract as customer prepayments liability on our consolidated balance sheets. We typically apply customer prepayments to an invoice within 30 days of the prepayment. Revenues in the three and nine months ended September 30, 2022 and 2021, include $
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, 2022 | % | % | % | % | ||||||||||||
| % of revenues, three months ended September 30, 2021 | % | % | % | % | ||||||||||||
| % of revenues, nine months ended September 30, 2022 | % | % | % | % | ||||||||||||
| % of revenues, nine months ended September 30, 2021 | % | % | % | % | ||||||||||||
| % of accounts receivable, as of September 30, 2022 | % | % | % | % | ||||||||||||
| % of accounts receivable, as of December 31, 2021 | % | % | % | % | ||||||||||||
The following table presents revenues by geographic area shipped to (in thousands).
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| Other countries | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 6. PROPERTY AND EQUIPMENT
The following table details the components of property and equipment (amounts in thousands).
| September 30, | December 31 | |||||||||||
| 2022 | 2021 | Estimated Useful Lives | ||||||||||
| Land | $ | $ | ||||||||||
| Furniture and fixtures | - |
| ||||||||||
| Plant | - |
| ||||||||||
| Computer and software | - |
| ||||||||||
| Leasehold improvements | - |
| ||||||||||
| Machinery and equipment | - |
| ||||||||||
| Property and equipment, cost | ||||||||||||
| Less accumulated depreciation | ||||||||||||
| Property and equipment, net | $ | $ | ||||||||||
Amounts payable for property and equipment included in accounts payable totaled $
NOTE 7. LEASES
The components of lease expense and cash flows from leases (in thousands) follow.
| Three Months Ended September 30, | Nine Months Ended Setepmber 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Finance lease cost: | ||||||||||||||||
| Amortization of right-of use assets, included in cost of goods sold | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Operating lease cost, included in selling, general and administrative expenses: | ||||||||||||||||
| Fixed leases cost | ||||||||||||||||
| Variable lease cost | ||||||||||||||||
| Short-term lease cost | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||
| Operating cash flows from finance leases | $ | $ | $ | $ | ||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | $ | ||||||||||||
| Financing cash flows from finance leases | $ | $ | $ | $ | ||||||||||||
As of September 30, 2022, variable lease payments do not depend on a rate or index. As of September 30, 2022, and December 31, 2021, property and equipment, net, includes $
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
As of September 30, 2022, we do not believe it is certain that we will exercise any renewal options. The remaining terms of our leases and the discount rates used in the calculation of our lease liabilities as of September 30, 2022, follows.
| Operating Leases | Finance Leases | |||||||||||
| Remaining leases terms (in years) | - | - | ||||||||||
| Weighted average remaining lease terms (in years) | ||||||||||||
| Discount rates | - | - | ||||||||||
| Weighted average discount rate | ||||||||||||
Maturities of lease liabilities as of September 30, 2022, follows (in thousands).
| Operating | Finance | |||||||
| Leases | Leases | |||||||
| 2022 (three months ended December 31, 2022) | $ | $ | ||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Amounts representing interest | ( | ) | ( | ) | ||||
| Present value of lease obligations | $ | $ | ||||||
NOTE 8. DEBT
We finance certain amounts owed for annual insurance premiums under financing agreements. As of September 30, 2022, amounts due under insurance premium financing agreements are due in monthly installments of principal and interest through March 2023, at interest rates of
We borrow under a factoring agreement with a lender (the Lender), which provides a $
The Lender advanced us $
Additional information related to our factoring obligation (exclusive of the Over-advance) follows.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Average borrowings outstanding (in thousands) | $ | $ | $ | $ | ||||||||||||
| Amortization of debt issuance costs (in thousands) | $ | $ | $ | $ | ||||||||||||
| Interest paid, as a percentage of average outstanding borrowings | % | % | % | % | ||||||||||||
| Fees paid, as a percentage of average outstanding borrowings | % | % | % | % | ||||||||||||
As of September 30, 2022, we had $
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Long-term debt consists of the following (in thousands).
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Mortgage promissory note - Originally dated July 2020 and modified in December 2021. As modified, interest accrues at an annual rate which is the greater of % above the Lender's prime rate and % (% at September 30, 2022) payable in monthly installments through . Net of $ debt issuance costs at September 30, 2022. Face amount $ million. Secured by certain real property in Wynne, Arkansas. | $ | $ | ||||||
| Progress payment agreement - Dated August 2022. Original principal $. Interest is payable monthly at the rate of % per year. Due in , unless a finance lease is executed with the lender before that date for the related equipment. | ||||||||
| Equipment note - Dated May 2021. Original principal $. Due in monthly installments through . Interest accrues at the effective discount rate of % per year. | ||||||||
| Equipment note - Dated December 2019. Original principal $. Due in monthly installments through . Interest accrues at the effective discount rate of % per year. | ||||||||
| Equipment note - Initially recorded in November 2018, in an acquisition, at the present value of future payments using a discount rate of % per year. Due in monthly installments through . | ||||||||
| Total long-term debt, net | $ | $ | ||||||
Future principal maturities of long-term debt outstanding as of September 30, 2022, follow (in thousands).
| 2022 (three months ended December 31, 2022) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Principal maturities | ||||
| Debt issuance costs | ( | ) | ||
| Total long-term debt, net | $ |
NOTE 9. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS
In August 2022, our board of directors approved a 1 for 10 reverse split of our common stock. Our common stock began trading on a post-split basis on August 26, 2022. All share and per share information has been retrospectively adjusted for all prior periods presented giving retroactive effect to the reverse stock split. Such adjustments include calculations of our weighted average number of shares outstanding and loss per share, as well as disclosures regarding our share-based compensation and warrants.
On July 14, 2022, shareholders approved a
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
A summary of equity activity follows (in thousands, except share amounts).
| Shares | ||||||||||||||||||||||||
| Preferred | Preferred | Common | Accumulated | |||||||||||||||||||||
| Series G | Common | Stock | Stock | Deficit | Equity | |||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Common stock awards under equity incentive plans | ||||||||||||||||||||||||
| Common stock issued to vendor | ||||||||||||||||||||||||
| Net income | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||||||||||
| Common stock awards under equity incentive plans | ||||||||||||||||||||||||
| Common stock issued to vendor | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, June 30, 2022 | ( | ) | ||||||||||||||||||||||
| Common stock awards under equity incentive plans | ||||||||||||||||||||||||
| Common stock issued to vendor | ||||||||||||||||||||||||
| Other | - | - | - | - | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Shares | ||||||||||||||||||||||||
| Preferred | Preferred | Common | Accumulated | |||||||||||||||||||||
| Series G | Common | Stock | Stock | Deficit | Equity | |||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Common stock awards under equity incentive plans | ||||||||||||||||||||||||
| Common stock issued to vendor | ||||||||||||||||||||||||
| Other | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ||||||||||||||||||||||
| Common stock awards under equity incentive plans | ||||||||||||||||||||||||
| Common stock issued to vendor | ||||||||||||||||||||||||
| Exercise of common stock warrants | ||||||||||||||||||||||||
| Other | - | - | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ||||||||||||||||||||||
| Common stock awards under equity incentive plans | ||||||||||||||||||||||||
| Common stock issued to vendor | ||||||||||||||||||||||||
| Sale of common stock and common stock warrants, net of costs | ||||||||||||||||||||||||
| Exercise of common stock warrant | ||||||||||||||||||||||||
| Conversion of preferred stock into common stock | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
Share-based compensation by type of award follows (in thousands).
| Three Months Ended | ||||||||||||
| September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||
| Stock options | $ | $ | $ | |||||||||
| Restricted stock units | ||||||||||||
| Compensation expense related to common stock awards issued under equity incentive plan | $ | $ | $ | |||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Options
In the three months ended September 30, 2022, holders forfeited options for the purchase of up to
Stock Units
We have outstanding (i) restricted stock units (RSUs) issued under the 2014 Plan to employees and directors and (ii) other stock units (SUs) issued to a service provider. Each RSU and SU represents a contingent right to receive one share of common stock. Summaries of nonvested and vested stock unit and activity follow.
| Restricted Stock Units (Issued under 2014 Plan) | Stock Units Issued to Vendors | |||||||||||||||||||||||
| Number of Units | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | Number of Units | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | |||||||||||||||||||
| Nonvested at December 31, 2021 | $ | ( | ) | $ | - | |||||||||||||||||||
| Granted | ( | ) | - | |||||||||||||||||||||
| Forfeited | ( | ) | - | |||||||||||||||||||||
| Vested with service | ( | ) | - | - | - | - | ||||||||||||||||||
| Expensed | - | - | - | - | ||||||||||||||||||||
| Nonvested at March 31, 2022 | ( | ) | - | |||||||||||||||||||||
| Impact of Modification: | - | - | - | |||||||||||||||||||||
| Before modification | ( | ) | - | - | ||||||||||||||||||||
| After modification | ( | ) | - | - | ||||||||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||||||||||
| Vested with Service | ( | ) | - | - | - | - | ||||||||||||||||||
| Expensed | - | - | - | - | ||||||||||||||||||||
| Nonvested at June 30, 2022 | ( | ) | - | |||||||||||||||||||||
| Granted | ( | ) | ( | ) | ||||||||||||||||||||
| Vested with Service | ( | ) | - | - | - | - | ||||||||||||||||||
| Expensed | - | - | - | - | ||||||||||||||||||||
| Nonvested at September 30, 2022 | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Number of RSUs | ||||
| Vested at December 31, 2021 | ||||
| Vested with service | ||||
| Issued at vesting | ( | ) | ||
| Vested at March 31, 2022 | ||||
| Vested with service | ||||
| Issued at termination of service | ( | ) | ||
| Vested at June 30, 2022 | ||||
| Vested with service | ||||
| Vested at September 30, 2022 | ||||
As of September 30, 2022, issuance of
In the three months ended September 30, 2022, we issued the following under the 2014 Plan:
| ● | |
| ● | |
| ● | |
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
| ● | |
| ● | |
We issued
In April 2022, we modified
In the three months ended June 30, 2022, we issued a total of
Warrants
In the three months ended September 30, 2022, warrants for the purchase of up to
Subsequent Offering
In October 2022, we issued and sold
In addition, we issued warrants for the purchase of up to
NOTE 10. INCOME TAXES
Our tax expense for the three and nine months ended September 30, 2022 and 2021, differs from the tax expense computed by applying the U.S. statutory tax rate to net loss from continuing operations before income taxes as no tax benefits were recorded for tax losses generated in the U.S. As of September 30, 2022, we had deferred tax assets primarily related to U.S. federal and state tax loss carryforwards. We provided a full valuation allowance against our deferred tax assets as future realization of such assets is not more likely than not to occur.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 11. LOSS PER SHARE (EPS)
We calculate basic EPS 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.
We calculate diluted EPS 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. We calculate the dilutive effects of outstanding options, warrants, and nonvested stock units that vest solely on the basis of a service condition are calculated using the treasury stock method. We calculate the dilutive effects of the outstanding preferred stock using the if-converted method.
Reconciliations of the numerators and denominators in the EPS computations follow.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| NUMERATOR (in thousands): | ||||||||||||||||
| Numerator for basic and diluted EPS - net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| DENOMINATOR: | ||||||||||||||||
| Weighted average number of shares of shares of common stock outstanding | ||||||||||||||||
| Weighted average number of shares of common stock underlying vested RSUs | ||||||||||||||||
| Denominator for basic and diluted EPS - weighted average number of shares outstanding | ||||||||||||||||
No effects of potentially dilutive securities outstanding were included in the calculation of diluted EPS for the three and nine months ended September 30, 2022 and 2021, because to do so would be antidilutive as a result of our net loss. Potentially dilutive securities outstanding during the three and nine months ended September 30, 2022 and 2021, included our outstanding convertible preferred stock, options, warrants and nonvested stock units.
NOTE 12. FAIR VALUE MEASUREMENTS
The fair value of cash and cash equivalents, accounts and other receivables, accounts payable and commodities payable approximates their carrying value due to shorter maturities. As of September 30, 2022, the fair values of our operating lease liabilities were approximately $
The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our consolidated balance sheets (in thousands):
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Total liabilities at fair value as of September 30, 2022 - Derivative warrant liability | $ | $ | $ | $ | ||||||||||||
| Total liabilities at fair value as of December 31, 2021 - Derivative warrant liability | $ | $ | $ | $ | ||||||||||||
| Total liabilities at fair value as of September 30, 2021 - Derivative warrant liability | $ | $ | $ | $ | ||||||||||||
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
The following tables summarize the changes in level 3 items measured at fair value on a recurring basis for the three and nine months ended September 30, 2022 and 2021 (in thousands):
| Fair Value as of Beginning of Period | Total and Unrealized | Issuance of New Instruments | Net of | Fair Value, at End of Period | Change in Unrealized Gains (Losses) on Instruments Still Held | |||||||||||||||||||
| Three months ended September 30, 2022 | ||||||||||||||||||||||||
| Total Level 3 fair value - Derivative warrant liability | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Nine months ended September 30, 2022: | ||||||||||||||||||||||||
| Total Level 3 fair value - Derivative warrant liability | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Three and nine months ended September 30, 2021 | ||||||||||||||||||||||||
| Total Level 3 fair value - Derivative warrant liability | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The derivative warrant liability relates to a warrant issued in September 2021, for the purchase of up to
| September 30, 2022 | December 31, 2021 | |||||||
| Assumed volatility | % | % | ||||||
| Assumed risk free interest rate | % | % | ||||||
| Expected life of options (in years) | ||||||||
| Expected dividends | ||||||||
The fair value of Warrant A approximates the cash settlement the holder could elect to be paid in the event of a change in control. At September 30, 2022, an $
NOTE 13. COMMITMENTS AND CONTINGENCIES
PPP Audit Contingency
In April 2020, we received $
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Employment Contracts and Severance Payments
In the normal course of business, we periodically enter into employment agreements which incorporate indemnification provisions. While the maximum amount to which we may be exposed under such agreements cannot be reasonably estimated, we maintain insurance coverage, which we believe will effectively mitigate our obligations under these indemnification provisions. No amounts have been recorded in our financial statements with respect to any obligations under such agreements.
We have employment contracts with certain officers and key management that include provisions for potential severance payments in the event of without-cause terminations or terminations under certain circumstances after a change in control. In addition, vesting of outstanding nonvested equity grants would accelerate following a change in control.
Legal Matters
From time to time, we are involved in litigation incidental to the conduct of our business. These matters may relate to employment and labor claims, patent and intellectual property claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position or results of operations. We expense defense as incurred. Defense costs, when incurred, are included in selling, general and administrative expense.
NOTE 14. FAILURE TO COMPLY WITH NASDAQ LISTING REQUIREMENTS
On September 15, 2021, we received a notification letter from The Nasdaq Stock Market LLC (Nasdaq) indicating that we have failed to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires that companies listed on the Nasdaq Capital Market maintain a minimum bid price of $1.00. To regain compliance with this listing rule, the closing bid price of our common stock had to be at least $1.00 for a period of Nasdaq’s discretion, of at least 10, but not to exceed 20, consecutive business days. On September 12, 2022, Nasdaq notified us that we had regained compliance with the minimum bid price requirement and the matter was closed.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations - Three Months Ended September 30, 2022, Compared to Three Months Ended September 30, 2021
Revenues of $10.3 million in the third quarter of 2022 increased $3.3 million, or 48.3%, compared to the third quarter of 2021. This year-over-year increase was due to higher core-SRB sales and strong growth from our MGI and Golden Ridge milling operations.
Gross loss was $0.7 million in the third quarter of 2022, a $0.4 million increase in gross loss compared to the third quarter of 2021. The increase in gross loss was attributable to lower sales and cost overruns for our value-added SRB derivatives business and higher gross losses at our Golden Ridge milling operation versus a year ago, offset in part by improved profitability from our core-SRB business and MGI milling operation.
Selling, general and administrative (SG&A) expenses were $1.8 million in the third quarter of 2022 and the third quarter of 2021 as reductions in corporate support headcount and outside professional services were offset in part by higher wage rates and higher contract employee expense, as well as a double-digit increase in insurance premiums.
Due to the increase in gross losses, operating losses were $2.5 million in the third quarter of 2022, up from $2.1 million in the third quarter of 2021. In the third quarter of 2022, we recognized a $0.6 million gain for the change in the fair value of a warrant liability. As a result of higher operating losses being offset by this gain, net loss in the third quarter of 2022 was $2.0 million, or $0.38 per share, compared to a net loss of $2.2 million, or $0.47 per share, in the third quarter of 2021.
Results of Operations – Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021
Revenues of $31.0 million in the first nine months of 2022 increased $8.0 million, or 34.7%, compared to the nine months of 2021. This year-over-year increase was due to higher core-SRB sales and strong growth from our MGI and Golden Ridge milling operations, offset in part by lower value-added SRB derivative product revenues due to production issues in the second quarter of 2022.
The $1.2 million decrease in gross profit in the first nine months of 2022, compared to the first nine months of 2021, was primarily attributable to lower gross profits from our value-added SRB derivative products and a modest increase in gross losses from Golden Ridge, offset in part by a modest increase in gross profits for our core-SRB business and MGI.
SG&A expenses of $5.2 million in the first nine months of 2022 decreased $0.3 million, or 5.7%, compared to the first nine months of 2021, as reductions in corporate support headcount and outside professional services were offset in part by higher wage rates and insurance premiums.
We recognized a gain on the involuntary conversion of assets of $0.1 million in the first nine months of 2022, when we finalized our insurance claim for hurricane damage that occurred in August 2020 to our Lake Charles, Louisiana property.
Operating losses were $5.7 million in the first nine months of 2022, up from $5.0 million in the first nine months of 2021, due to lower gross profits. In January 2021, we recognized a $1.8 million gain on extinguishment of our Small Business Administration (SBA) Paycheck Protection Program (PPP) loan (see Note 13 of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of the loan). As a result of higher operating losses, lower SG&A, the impact of the gain on involuntary conversion of assets and the nonrecurring gain on the extinguishment of debt in the first nine months of 2021, net loss in the first nine months of 2022 was $6.2 million, or $1.17 per share, compared to a net loss of $3.5 million, or $0.38 per share, in the first nine months of 2021.
Liquidity, Going Concern and Capital Resources
We had $4.4 million in cash and equivalents as of September 30, 2022, a decrease of $1.5 million from $5.8 million on December 31, 2021. During the first nine months of 2022, we were able to offset higher operating losses with increased borrowing.
Cash used in operating activities in the first nine months of 2022 was $3.9 million, up from $2.0 million in the first nine months of 2021, driven principally by higher net losses. Cash used in investing activities in the 2022 period consisted of $0.4 million in capital expenditures, primarily for the purchase and installation of capital equipment at our MGI facility offset by $0.1 million in insurance proceeds. Cash from financing activities in the 2022 period was $2.7 million, which included the $1.8 million net borrowings on a line of credit and a $0.9 million over-advance on our factoring facility (see Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of the over-advance).
Management believes that despite the multi-year history of operating losses and negative operating cash flows from continuing operations, there is no substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements included in this Quarterly Report are issued. Factors alleviating this concern include $4.4 million in cash and cash equivalents as of September 30, 2022, and our ability to procure additional capital if needed through a variety of sources. Most notably, subsequent to the end of the third quarter of 2022, we were able to raise approximately $1.2 million, net of costs, through a direct placement of our common stock, and common stock equivalents, and in late September 2022, we received a $0.9 million over-advance on our factoring facility, pending a restructuring of our mortgage promissory note secured by our real property in Wynne, Arkansas.
On March 30, 2020, we entered into a sales agreement with respect to an at-the-market (ATM) offering program, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $6.0 million, which we currently have $2.8 million remaining. Under the terms of the securities purchase agreement related to the September 2021 offering, we are prohibited from entering into an agreement to effect any at-the-market issuance until September 13, 2023.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the financial statements. On an ongoing basis, we evaluate the estimates, including, but not limited to, those related to revenue recognition, inventory valuation, and long-lived asset impairment. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates.
Recent Accounting Pronouncements
See Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures. As of September 30, 2022, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 2021 Annual Report on Form 10-K.
We evaluated, with the participation of our executive chairman, and chief financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our executive chairman and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
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, 2021, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended September 30, 2022, we issued the securities described below without registration under the Securities Act. The description below does not include issuances that we disclosed previously on Current Reports on Form 8-K. Unless otherwise indicated below, the securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act). We made the issuance below without any public solicitation, to a limited number of sophisticated persons and were acquired for investment purposes only.
On September 30, 2022, we issued 600 shares of common stock to a service provider, which is not a natural person, as compensation for service provided. The shares were valued at an aggregate of $2,100.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 3.02 Unregistered Sales of Equity Securities
On November 1, 2022, we amended the terms of our engagement of Gander Foods, LLC, a New Jersey limited liability company (the Operator), to perform services in connection with our rice milling operations and those of Golden Ridge Rice Mills, Inc., our wholly owned subsidiary. The engagement was described in our Current Report on Form 8-K filed on September 29, 2022 (the Original 8-K).
As amended, the Operator’s initial cash compensation of $200,000 (the Initial Compensation) will be used by the Operator to purchase an aggregate of 160,000 (rather than 38,968) unvested restricted stock units (SUs), each representing the contingent right to receive one share of our common stock. All other terms of the engagement remain the same and are unchanged, and the total amount of SUs that may be purchased by the Operator with the Initial Compensation or the Performance Compensation (as defined in the Original 8-K) may still not exceed 1,000,000.
The SUs are being offered and sold in a private placement to an eligible investor pursuant to Section 4(a)(2) of the Securities Act. The SUs and underlying shares of our common stock have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration under or an applicable exemption from registration under the Securities Act and any applicable state securities laws.
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 |
||||||
| 3.1 |
8-K |
001-36245 |
3.1 |
August 25, 2022 |
||||||||
| 31.1 |
X |
|||||||||||
| 31.2 |
X |
|||||||||||
| 32.1 |
X |
|||||||||||
| 101.INS (1) |
Inline XBRL Instance Document |
X |
||||||||||
| 101.SCH (1) |
Inline XBRL Taxonomy Extension Schema Document |
X |
||||||||||
| 101.CAL (1) |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
X |
||||||||||
| 101.DEF (1) |
Inline XBRL Taxonomy Extension Calculation Definition Linkbase Document |
X |
||||||||||
| 101.LAB (1) |
Inline XBRL Taxonomy Extension Calculation Label Linkbase Document |
X |
||||||||||
| 101.PRE (1) |
Inline XBRL Taxonomy Extension Calculation Presentation Linkbase Document |
X |
||||||||||
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|||||||||||
| (1) |
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: November 3, 2022 |
RiceBran Technologies |
|
| /s/ Peter G. Bradley |
||
| Peter G. Bradley |
||
| Director and Executive Chairman |
||
| /s/ Todd T. Mitchell |
||
| Todd T. Mitchell |
||
| Chief Financial Officer and Chief Operating Officer |
||