UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2019
☐ | TRANSITION REPORT PURSUANT TO 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 | 87-0673375 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) | |
1330 Lake Robbins Drive, Suite 250 The Woodlands, TX | 77380 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (281) 675-2421
Securities registered under Section 12(b) of the Exchange 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 |
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging"emerging growth company”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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). YES ☐ NO ☒
As of June 30, 2019,2020, the aggregate market value of our common stock held by non-affiliates was approximately $70.1$23.4 million calculated by using the closing price of the common stock on such date on NASDAQ Capital Market of $2.91$0.83 per share.
As of March 24, 2020,February 25, 2021, there were 40,074,48345,238,087 shares of common stock outstanding.
Documents incorporated by reference: Portions of the registrant’s Definitive Proxy Statement for its annual meeting of shareholders, which Definitive Proxy Statement will be filed with the Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2019,2020, are incorporated by reference into Part III of this Annual Report on Form 10-K.
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions.Words such as “believes,” “anticipates,” “expects,” “estimates,“estimates,” “intends,“intends,” “plans,” “projects,” “will,” “may” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.These forward-looking statements are not guarantees of future performance and concern matters that could subsequently differ materially from those described in the forward-looking statements.Future events and actual results could differ materially from those discussed in this Annual Report. These risks and uncertainties include those described in “Risk Factors” and elsewhere in this Annual Report. Except as required by law, we undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this Annual Report. We do not endorse any projections regarding future performance that may be made by third parties.
Unless the context requires otherwise, references to “we,” “us,” “our” and the “Company” refer to RiceBran Technologies, and its consolidated subsidiaries.
Overview
Our Company
We are a specialty ingredient company that utilizes proprietary stabilization and separation technologies, supported by specialty milling processes, to deliver critical nutritional and functional ingredients derived from ancient grains for the food, nutraceutical, pet care and animal feed categories. We are focused on milling rice and other small grains and producing, processing and marketing value-added healthy, natural and nutrient dense products derived from these grains. Notably, through the application of our proprietary technologies we are a market leader in North America in converting raw rice bran into stabilized rice bran (SRB) and high value derivative products including:
● | RiBalance, a complete rice bran nutritional package derived from further processing of SRB; |
● | RiSolubles, a highly nutritious, carbohydrate and lipid rich fraction of RiBalance; |
● | RiFiber, a protein and fiber rich insoluble derivative of RiBalance; and |
● | our family of ProRyza products, which includes derivatives composed of protein and protein/fiber blends. |
Over the past decade, we have developed our products by optimizing our proprietary processes to support the production of healthy, natural, and non-genetically modified ingredients that are gluten free and free of all major allergens for use in baked goods, cereals, coatings, health foods, high-end animal nutrition, and animal health products. Our existing and target customers are food and animal nutrition manufacturers, wholesalers and retailers, both domestically and internationally.
We incorporated under the laws of the State of California in 2000. From July 2003 until October 2012, our corporate name was “NutraCea.” In October 2012, we changed our name to RiceBran Technologies. SinceIn 2018, we moved our corporate headquarters is located into The Woodlands, Texas. Over the past several years, we have acquired and divested of certain investments:
● | 2019 – Acquired MGI Grain Processing, LLC., an East Grand Forks, Minnesota based company now operating as MGI Grain, Incorporated (MGI) which operates a grain mill and processing facility in East Grand Forks, Minnesota, |
● | 2018 – Acquired Golden Ridge Rice Mills, LLC, a Wynne, Arkansas based company now operating as Golden Ridge Rice Mills, Inc. (Golden Ridge) which operates a rice mill in Wynne, Arkansas, |
● | 2017 – Divested of our majority interest in Nutra S.A. LLC (Nutra SA). Nutra SA’s only operating subsidiary was Industria Riograndens De Oleos Vegetais Ltda. (Irgovel), which operates a rice bran oil refining plant in Pelotas, Brazil. |
● | 2017 – Divested of Healthy Natural, Inc. (HN), which had a formulating, blending and co-packaging facility in Irving, Texas, that manufactured blended and/or packaged functional food products for the nutrition and functional food markets. |
We currently source SRB at four locations: two leased raw rice bran stabilization facilities located within supplier-owned rice mills in Arbuckle and West Sacramento, California, one company-owned rice bran stabilization facility in Mermentau, Louisiana, and our company-owned rice mill, Golden Ridge, in Wynne, Arkansas. “Stage II” refers to the products produced using proprietary processing equipment and technology for the stabilization and further processing of rice branSRB into finished products. We produce our Stage II products at our Dillon, Montana facility, including: RiSolubles, RiFiber, RiBalance, and our ProRyza family of products.
Rice Mill
On November 28, 2018 we acquired Golden Ridge Rice Mills, LLC, a recently constructed rice milling and bran stabilization facility on nearly 32 acres in Wynne, Arkansas.
Golden Ridge provides us with a presence in the largest rice-producing state and a cost-efficient source of SRB that is close to many of our customers in the Midwest and Eastern U.S. Golden Ridge specializes in producing #1 and #2 Grade U.S. premium long and medium white rice milled to United States Department of Agriculture (USDA) standards, as well as brown rice, brewers rice, and brokens. We believe these products offer synergies to our core SRB business and should enable our sales team to deepen our relationship with our customers. Golden Ridge adheres to standard operating procedures and passed all the prerequisite audits required to meet Good Manufacturing Practice (GMP) standards and Safe Quality Food (SQF) certifications.Barley and Oats Mill
On April 4, 2019, we acquired MGI Grain Processing, LLC’s grain milling and processing facility in East Grand Forks, Minnesota which
specializes in processing barley and oats, and provides mustard toll milling services. MGI provides us with a milling presence in a key production region in the U.S. and a complimentary portfolio of barley and oat ingredients, as well as other ancient grains. This createsOur Products
We believe our greatest market opportunities are in the food ingredient and animal nutrition markets. Nutritionally balanced, minimally processed, gluten free, non-GMO and clean-label food and animal feed ingredients are in high demand, and we are strategically positioned to take advantage of this growing and sustainable market opportunity as discussed below in “Our Growth Strategy.”
Food Ingredients
Our SRB and derivative products are nutritional and beneficial food products that contain a unique combination of oil, protein, carbohydrates, vitamins, minerals, fibers, and antioxidants that enhance the nutritional value of popular consumer products. Our products replace ingredients like soy protein isolate, soy protein concentrate, modified food starch, pea protein, mustard flour and yeast at a significantly reduced cost. Foods that are ideally suited for the addition of our SRB to their products include processed meats, cereals, snacks, beverages, baked goods, breading, and batters.
Animal Nutrition
Our SRB is marketed as a feed ingredient in the United States and international animal nutrition markets, and we will continue to pursue sales opportunities with attractive margins in those markets. SRB is currently used as an ingredient in equine feed ingredient as it has been shown to provide health benefits for show and performance horses. By extension, weWe believe that there are also numerous market opportunities for utilizing SRB in the production of food for companion animals. We have multiple engagements with customers in the companion animal market, and we are aggressively pursuing other opportunities.
About Rice Bran
Rice is the staple food for over half of the world’s population, especially in some of the world’s most populous countries. Asia accounts for roughly 90% of global rice production and China is the world’s number one rice producer. Globally, the United States ranks 11th in rice production with approximately 2% of the global total.
When harvested from the field, individual rice kernels are stored in common receiving locations such as farm silos for future delivery to grain dryers or area rice mills. At this stage, large quantities of individual rice kernels are collectively called “paddy rice,” or “rough” rice. In this form, the rice kernel is fully enveloped by the rice hull, which serves as a protective cover, shielding the inner rice kernel from damage.
After storage and drying, if necessary, paddy rice is cleaned of foreign material (scalping, de-stoning and aspiration) before it enters the first stage of milling, or paddy husking. In the paddy husker, the hull is removed from rough rice by differential speed rubber rollers. Loosened hulls are carried off by aspiration. After husking, a paddy separator uses a reciprocating motion to separate normal brown rice kernels (caryopsis) from unhusked kernels which are returned to the paddy husker.
Once husked, the outer brown layers of bran are removed from the inner white starch endosperm by an abrasive or frictional milling process which produces a milled, white rice kernel. After milling, white rice is typically sorted by size to remove broken pieces of rice kernels from whole kernels, as well as color sorting to remove discolored kernels. Additional stagesFurther processing may be required (per customer specifications) to polish the white rice to a smooth surface.
Raw rice bran collected from the milling process is composed of rice germ and several sub-layers (pericarp, testa, nucellus and aleurone) surrounding the white starchy endosperm. Commercial rice bran makes up approximately 10% of rough rice by weight. Rice germ, an especially nutrient rich material, makes up approximately 10% of commercial rice bran by weight.
As brown rice is milled into white rice, the oils present in raw rice bran come into contact with native lipase enzymes that are naturally present in the rice kernel. These lipase enzymes initiate a rapid enzymatic hydrolysis of the oil, converting oils (triglycerides) into monoglycerides, diglycerides and free fatty acids (FFA). As the FFA content builds in raw rice bran, the bran becomes unpalatable and off flavors (rancidity) develop.
If left unchecked, enzymatic degradation at normal room temperatures can increase the FFA levels to 5-8% within 24 hours and can continue at a rate of approximately 4-5% per day thereafter. Enzymatic degradation is the most serious form of degradation of raw rice bran. Rice bran stabilization is the process of carefully deactivating native enzymes to prevent the increase of FFA otherwise caused by lipase enzyme activity. Proper stabilization is critical in the preservation of the nutritional value of the bran.
Historically, there have been a number of attempts to develop rice bran stabilization techniques, including the use of chemicals, microwave heating or variations of existing extrusion technology. Many of these approaches have had limited success in part because they have produced rice bran with limited shelf life or with significant degradation of nutrients.
Our Technologies
Our Proprietary Rice Bran Stabilization Technology
Our stabilization process uses proprietary innovationsprocesses to create a combination of temperature, pressure and other conditions necessary to thoroughly deactivate enzymes without significantly damaging the structure or nutrient content of the raw rice bran. This means that higher value compounds in bran, such as oils, proteins and phytonutrients are left undamaged and are available for utilization. Our process does not use chemicals to stabilize raw rice bran.
We install our stabilizers are designed to be installed adjacent to, on the premises of or in nearclose proximity to any conventionala rice mill so that freshly milled raw rice bran can be quickly delivered to our proprietary stabilizers.quickly. Process logic controllers maintain exact process conditions within the prescribed pressure/temperature regime. In case of power failure or interruption of the flow of fresh bran into the system, the electronic control system is designed to purge the equipment of materials in process and resume production only after proper operating conditions are re-established.
Once stabilized, SRB leaving our system is then discharged onto cooling units specifically designed to control air pressure and humidity. CooledOnce cooled, SRB can be loaded into bulk hopper trucks for large volume customers or sent by pneumatic conveyor to a bagging unit for packaging into various size bags or 2,000-pound sacks.
Each stabilization moduleof our stabilizers can process approximately 2,000 pounds of bran per hour and has a capacity of over 7,200 tons per year. Stabilization production capacity can be doubled, tripled or further multiplied by installing additional units sharing a common conveyor and stage system. We have also developed and tested a smaller production unit, with a maximum production capacity of 600 pounds per hour, for installation in locations where rice mills are substantially smaller than those in the United States.
Additional proprietary processes involve enzyme treatment of SRB to produce fractions enriched in one or more macronutrients, including proteins, fibers, lipids and micronutrients such as vitamins, minerals and phytosterols, among others. In these processes, SRB is input into an aqueous slurry, where it is treated with one or more enzymes, centrifugally separated and the fractions are dried on drum driers, spray driers or other drying systems.
Our Stabilization ProcessSRB Attributes
Rice bran is free of all major allergens and is a valuable source of protein with a balanced amino acid profile for food ingredient products and is rich in healthy oil, vitamins, antioxidants, dietary fiber and other nutrients. The approximate composition and caloric content of our SRB is as follows:
| Fat (oil) | 18 | - | 23% | ||
| Protein | 12 | - | 16% | ||
| Total Dietary Fiber | 20 | - | 30% | ||
| Moisture | 4 | - | 8% | ||
| Ash | 6 | - | 14% | ||
| Calories | 3.2 kcal/gram | ||||
Because SRB contains approximately 18-23% oil, whichit has a favorable fatty acid composition and excellent heat stability.
Intellectual Property
Our stabilization and processing activities are an adaptation and refinement of standard food processing technology applied to rice bran. We have chosen to treat our methods and processes as a trade secret and not to pursue process or process equipment patents on the original processes. As we develop improvements, we intend to periodically review whether we should seek patent protection for them. We believe that certain unique products, and their biological effects, resulting from our SRB may be patentable in the future. We also hold a number of U.S. registered trademarks and trade names and have applied for additional marks.
We continue to support internal as well as external R&D efforts that improve on existing technologies or lead to the development of new technologies relating to rice bran processing and applications.
Our Growth Strategy
We are pursuing a simple growth strategy based on a few key initiatives to grow our markets and business, improving our financial condition, and maximizing shareholder value. The following points summarize our growth strategy:
1. | Product Line Expansion: |
● | Continued Expansion of SRB Derivatives – Ri-Solubles; in both conventional and organic forms, is the premium product in the portfolio with upside potential, and we are focused on expanding production and sales. Ri-Fiber is an excellent source of dietary fiber that can provide organoleptic improvements in a range of supplement products, and potentially an excellent feedstock for further processing to isolate nutritional and functional components. Both products are produced at our Dillion, MT manufacturing facility which offers room for expansion. |
● | New Stabilized Rice Bran (SRB) Formats – We expect to launch ready-to-eat (RTE) variants of SRB eliminating the need for further heat processing prior to consumer consumption. SRB can be used as an excipient and flow agent in tablets, capsules, and nutritional powders. We believe RTE SRB will provide access to new applications for SRB particularly in the supplement category as it will allow for the replacement of chemically derived ingredients enabling natural and non-GMO claims to be made on finished consumer products. |
● | Value-Added Blending Capabilities – We hope to enhance the values of our core products by adding the capability to combine them with other ingredients in order to deliver improved nutrition, functionality, and organoleptic properties. Other ingredient components will be sourced from both domestic and international supply partners and likely to include plant-based protein and carbohydrates. Combinations of |
2. | Further Organic Expansion: While we currently have several organic product lines, notably rice bran derivatives and certain milled products, and we believe there is a significant opportunity to further expand our organic product offering. We expect to achieve this through |
3. | Sales InitiativeExpansion: We have restructured and established two business groups each headed by a senior sales executive who will be responsible for the commercial strategy and execution of the business group across all product lines. |
● | Supplement and Wellness Business Group – This group will build on the existing business in this category by expanding market penetration, introducing new products and blending capabilities, and developing partnerships with third-party developers and manufacturers to |
● | Food and Animal Feed Business Group – The key focus of this group is to expand the current business in processed food[s], pet care and equine feeds, including developing the optimum go-to-market structure for these categories. In the fourth quarter of 2020, we recruited a senior commercial executive to lead this initiative. |
4. | Supply Chain Expansion: Partnership with key rice mills in California and Louisiana will remain a cornerstone of our |
5. | Increased Operating Efficiencies: We are focused on improving our operational efficiencies while driving cost and expense reductions. |
The global and domestic markets are strong and rapidly expanding for minimally processed plant-based ingredients that provide dense and balanced nutrition in addition to evidence-based functionalities while also being non-GMO, gluten free and free of all major allergens. The regulatory requirements to add front-of-label warnings on food items and increasing demand from consumers for foods that list fewer and less processed ingredients is driving food companies to replace standard food ingredients with cleaner ingredients, such as SRB. We anticipate further incorporation of our food ingredients by major consumer packaged goods food companies as more food companies adopt rice bran as a standard clean label food ingredient. This trend is not limited to food ingredients, as we are finding similar transition to clean ingredients among high-end animal nutrition companies.
Our Customers
We use internal sales staff, outside independent sales representatives and third-party distributors to market our portfolio of products to customers domestically and internationally. In 20192020 and 2018,2019, three customers accounted for 36%26% and 32%36% of our revenues, respectively. We continue to focus efforts on diversification of our customer base in an attempt to mitigate the concentration of customers.
Government Regulations
Our operations are subject to federal, foreign, state and local government laws and regulations, including those relating to zoning, workplace safety and accommodations for the disabled, and our relationships with our employees are subject to regulations, including minimum wage requirements, anti-discrimination laws, overtime and working conditions and citizenship requirements.
In both our United States and foreign markets, we are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints exist at the federal, state and local levels in the United States, and at all levels of government in foreign jurisdictions, including regulations pertaining to the formulation, manufacturing, packaging, labeling, distribution, sale and storage of our products. In addition, we are subject to regulations regarding product claims and advertising.
The formulation, manufacturing, packaging, labeling, advertising, distribution and sale of our products are subject to regulation by one or more federal agencies, primarily the Food & Drug Administration (FDA), the Federal Trade Commission (FTC) and the USDA. Our activities are also regulated by various governmental agencies for the states and localities in which our products are manufactured and sold, as well as by governmental agencies in certain countries outside the United States. Among other matters, regulation by the FDA and FTC is concerned with product safety and claims made with respect to a product’s ability to provide health-related benefits. Specifically, the FDA, under the Federal Food, Drug and Cosmetic Act (FDCA), regulates the formulation, manufacturing, packaging, labeling, distribution and sale of food and food ingredients. The FTC regulates the advertising of these products.
Federal agencies, primarily the FDA and the FTC, have a variety of procedures and enforcement remedies available to them, including initiating investigations, issuing warning letters and cease-and-desist orders, requiring corrective labeling or advertising, requiring consumer redress such as requiring that a company offer to repurchase products previously sold, seeking injunctive relief or product seizures, imposing civil penalties or commencing criminal prosecution. In addition, certain state agencies have similar authority. These federal and state agencies have in the past used these remedies in regulating participants in the food and food ingredient industries, including the imposition of civil penalties.
The FDA Food Safety Modernization Act (FSMA), enacted January 4, 2011, amended the FDCA to significantly enhance the FDA’s authority over various aspects of food regulation. The FSMA granted the FDA mandatory recall authority when the FDA determines there is a reasonable probability that a food is adulterated or misbranded and that the use of, or exposure to, the food will cause serious adverse health consequences or death to humans or animals. One of the more significant changes under FSMA is the requirement of hazard analysis and risk-based preventive controls (HARPC) for all human and animal food processing facilities. We are committed to FSMA compliance and are SQF certified at all but one of our facilities, and certification for this facility is expected in 1Q20.
Any substance that is intentionally added to food is a food additive and is subject to premarket review and approval by the FDA, unless the substance is generally recognized, among qualified experts, as having been adequately shown to be safe under the conditions of its intended use, or unless the use of the substance is otherwise excluded from the definition of a food additive. When an additive is proposed for use in a meat, its safety, technical function and conditions of use must also be evaluated by the USDA. Because the USDA retains jurisdiction over meat products and food ingredients intended for use in meats, the use of our SRB meat enhancers is regulated by this agency. SRB has USDA approval for use in certain meat products.
Animal feed ingredients are regulated by the FDA at the federal level and by the individual states. Our SRB is defined for animal use as heat stabilized rice bran for use as a feed ingredient.
There are a number of companies that have invested significant resources to develop technologies for stabilizing and processing rice bran and who market rice bran products into multiple markets around the world. We believe that we have best of breedproprietary technologies and processes for stabilizing rice bran and, as such, have developed significant brand recognition in the animal feed and food ingredient product sectors both domestically and internationally. Together with our decades of application technology know-how and proprietary processing methods, we believe that we have a first-to-marketcompetitive advantage over the competitionother suppliers with respect to ourproducing SRB.
We are aware of several new producers of rice-based animal nutrition and food ingredient products in the United States, Europe and Asia. We believe that our major competitors include producers of isolated soy protein, wheat bran and oat bran, particularly in the food ingredients market segment. We compete with other companies that offer products incorporating SRB as well as companies that offer other food ingredients. Many consumers may consider such products to be a replacement for the products we manufacture and distribute.
Our Employees
As of December 31, 2019,2020, we had 12199 employees. From year to year, we experience normal variable labor fluctuation at our production facilities. We believe relationsthat we have positive relationships with our employees are good.employees. None of our employees are covered by collective bargaining agreements.
Available Information
We maintain an Internet website at the following address: www.ricebrantech.com.www.ricebrantech.com. We make available on or through our Internet website certain reports and amendments to those reports that we file with the Securities and Exchange Commission (SEC) in accordance with the Securities Exchange Act of 1934 (Exchange Act). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and the reports of beneficial ownership. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. The contents of our website are not incorporated by reference in this report on Form 10-K and shall not be deemed “filed” under the Exchange Act.
Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. Investors or potential investors in our stock should carefully consider the risks described below.
RISK FACTORS
Risks Relating to Our Business
We have not yet achieved annual positive cash flows.
Our net cash used in operating activities of continuing operations was $7.9 million in 2020 and $13.5 million in 2019 and $5.2 million in 2018.2019. We may not be able to achieve revenue growth, profitability or positive cash flow, on either a quarterly or annual basis, and that profitability, if achieved, may not be sustained. If we are unable to achieve or sustain profitability, we may not be financially viable in the future and may have to curtail, suspend, or cease operations, restructure existing operations to attempt to ensure future viability, or pursue other alternatives such as pursuing dissolution and liquidation, seeking to merge with another company, selling all or substantially all of our assets or raising additional capital through equity or debt financings.
We have generated significant losses since our inception in 2000, and losses in the future could cause the trading price of our stock to decline or have a material adverse effect on our financial condition, cash flow, and ability to pay our debts as they become due.
Since we began operations in February 2000, we have incurred an accumulated deficit in excess of $287.2$298.9 million. We may not be able to achieve or maintain profitable operations if achieved. If our losses continue, our liquidity may continue to be severely impaired, our stock price may fall and our shareholders may lose all or a significant portion of their investment. If we are not able to attain profitability in the near future our financial condition could deteriorate further which could have a material adverse impact on our business and prospects and result in a significant or complete loss of shareholder investment. Further, we may be unable to pay our debt obligations as they become due, which include obligations to secured creditors.
We may need to raise additional funds through debt or equity financings in the future to achieve our business objectives and to satisfy our cash obligations, which would dilute the ownership of our existing shareholders and possibly subordinate certain of their rights to the rights of new investors.
We may need to raise additional funds through debt or equity financings in order to complete our ultimate business objectives. We also may choose to raise additional funds in debt or equity financings if they are available to us on reasonable terms to increase our working capital, strengthen our financial position or to make acquisitions. Our board of directors has the ability, without seeking shareholder approval, to issue convertible debt and additional shares of common stock or preferred stock that is convertible into common stock for such consideration as the board of directors may consider sufficient, which may be at a discount to the market price. Any sales of additional equity or convertible debt securities could result in dilution of the equity interests of our existing shareholders, which could be substantial. Additionally, if we issue shares of preferred stock or convertible debt to raise funds, the holders of those securities might be entitled to various preferential rights over the holders of our common stock, including repayment of their investment, and possibly additional amounts, before any payments could be made to holders of our common stock in connection with an acquisition of us. Such preferred shares, if authorized, might be granted rights and preferences that would be senior to, or otherwise adversely affect, the rights and the value of our common stock. Also, new investors may require that we and certain of our shareholders enter into voting arrangements that give them additional voting control or representation on our board of directors. We have a limited number of authorized and unissued (and unreserved) shares, which limits our ability to raise additional funds through such debt or equity financings. Our shareholders would need to approve any increase in the number of authorized shares. In the event that we determine that such an increase is desirable, it is possible our shareholders will not approve the increase.
Our outstanding debt is subject to terms that may adversely affect our operations and financial condition.
We entered into a factoring agreement in October 2019. The factoring agreement provides for a $7.0 million credit facility which we may draw upon to the extent we have qualifying accounts receivable as defined in the agreement. The lender has the right to demand repayment of advances under the facility at any time, and amounts owed under the agreement are secured by our personal property assets. If the lender demands repayment and we fail to make such repayment, or if we cause or permit any other event of default as defined in the agreement or fail to comply with covenants set forth in the agreement (including restrictions on incurring other debt under unsecured loans), we would be subject to additional expenses or possible foreclosure on our assets that secure our obligations under the agreement. Such results could have a material adverse effect on our operations and financial condition.
We received $1.8 million on an SBA Payroll Protection Program loan in April 2020 as provided for in the Coronavirus Aid, Relief and Economic Security Act (CARES), enacted into U.S. law in March 2020. The loan and accrued interest were to be forgivable, provided that the loan proceeds were used for eligible purposes. The loan and related accrued interest were completely forgiven in January 2021.
We entered into a mortgage agreement with a lender pursuant to a promissory note in July 2020. We borrowed $2.0 million available on the note. The principal amount of the note must be repaid in monthly installments ending in June 2022. The note is secured by certain real property and personal property assets of Golden Ridge Rice Mills, Inc. If we fail to make repayment, we would be subject to additional expenses or possible foreclosure on the assets that secure our obligations under the agreement. Such results could have a material adverse effect on our operations and financial condition.
In 2018, we identified material weaknesses in our internal control over financial reporting, and if we are unable to maintain effective internal control over financial reporting, investors could lose confidence in our consolidated financial statements and our Company, which could have a material adverse effect on our business and our stock price.
In the course of preparing the financial statements for the fiscal year ended December 31, 2018, our management determined that we had material weaknesses in our internal control over financial reporting, which related to our accounting for significant and complex acquisitions and equity transactions. We have concluded that these material weaknesses in our internal control over financial reporting waswere primarily due to the relocation from Arizona to Texas in 2018 which reduced our accounting personnel that havewho had the appropriate level of experience and technical expertise to oversee the accounting and financial reporting requirements related to significant and complex acquisitions and equity transactions. As a result of these material weaknesses, in 2019, we initiated and implemented several remediation measures including, but not limited to: hiring a CPA licensed Chief Accounting Officer, engaging third parties to (i) assist us in complying with the accounting and financial reporting requirements related to significant and complex acquisitions and equity transactions; and (ii) assist us with formalizing our business processes, accounting policies and internal control documentation, strengthening supervisory reviews by our management, and evaluating the effectiveness of our internal controls in accordance with the framework established by Internal Control - Integrated Framework (2013) published by the Committee of Sponsoring Organizations of the Treadway Commission. If these steps prove to be inadequate andAs of December 31, 2019, we fail to fully remediate theseconcluded that the material weaknesses orin our internal control over financial reporting were remediated. If we fail to maintain effective internal controls in the future, itthis could result in a material misstatement of our consolidated financial statements that would not be prevented or detected on a timely basis, which could cause investors to lose confidence in our financial information or cause the trading price of our common stock to decline.
There are significant market risks associated with our business.
We have formulated our business plan and strategies based on certain assumptions regarding the size of the rice, rice bran, barley and oat markets, our anticipated share of these markets, the estimated price and acceptance of our products and other factors. These assumptions are based on our best estimates; however, our assessments may not prove to be correct. Any future success may depend upon factors including changes in governmental regulation, increased levels of competition, including the entry of additional competitors and increased success by existing competitors, changes in general economic conditions, increases in operating costs including costs of rice bran, production, supplies, personnel, equipment, and reduced margins caused by competitive pressures. Many of these factors are beyond our control.
We may face difficulties integrating businesses we acquire.
As part of our strategy, we may review opportunities to buy other businesses or technologies, such as the acquisition of Golden Ridge that was completed in 2018, and the acquisition of MGI Grain that was completed in 2019, that would complement our current products, expand the breadth of our markets or enhance technical capabilities, or that may otherwise offer growth opportunities. Such acquisitions involve numerous risks, including, but not limited to:
● | problems combining the purchased operations, technologies or products; |
● | unanticipated costs; |
● | diversion of management’s attention from our core business; |
● | adverse effects on existing business relationships with suppliers and customers; |
● | risks associated with entering markets in which we have no or limited prior experience; and |
● | potential loss of key employees of purchased organizations. |
We depend on a limited number of customers and their ability to meet their obligations.
In 2019,2020, three customers accounted for 36%26% of revenues and the top ten customers accounted for 58%51% of revenues from continuing operations. As of December 31, 2019,2020, the customers with the highest ten balances accounted for 86%64% of accounts receivable.
We are dependent upon the continued growth, viability and financial stability of our customers. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenues. Consolidation among our customers may reduce our number of customers or result in a concentration of credit risk with respect to outstanding accounts receivable. We consider the financial strength of our customers, the remoteness of the possible risk that a default event will occur, the potential benefits to our future growth and development, possible actions to reduce the likelihood of a default event, and the benefits from the transaction, before entering into a large credit limit with a customer. Although we analyze these factors, the ultimate collection of the obligation from the customer may not occur. Although we continue to expand our customer base in an attempt to mitigate the concentration of credit risk, writing off of an accounts receivable balance could have an adverse effect on our results of operations. Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents and trade receivables. Historically, we have not experienced any loss of our cash and cash equivalents, but we have experienced losses to our trade receivables. A significant reduction in sales to any of our significant customers could have a material adverse effect on our results of operations.
We may encounter difficulties in maintaining relationships with distributors and customers while enforcing our credit policies.
We define credit risk as the risk of loss from obligors or counterparty default. Our credit risks arise from both distributors and customers. Many of these risks and uncertainties are beyond our control. Our ability to forecast future trends and spot shifts in consumer patterns or behavior even before they occur are vital for success in today’s economy. In managing risk, our objective is to protect our profitability, but also to protect, to the extent we can, our ongoing relationships with our distributors and customers. However, as part of our credit risk policies, we occasionally must, among other things, cancel, reduce credit limits and place cash-only requirements for certain questionable accounts. These credit risk policies may negatively impact our relationships with our distributors and customers, which could adversely affect our results of operations.
We rely upon a limited number of product offerings.
The majority of the products that we have sold through December 31, 2019,2020, have been based on SRB. A decline in the market demand for our SRB or the products of other companies utilizing our SRB products would have a significant adverse impact on us. Since the acquisition of Golden Ridge, we have also incorporated the sale of rice to our products sold towards the end of 2018. A decline in the market demand for finished rice or the by-products of rice milling could have a significant adverse impact on us.
Our ability to generate sales is dependent upon our ability to continue our ongoing marketing efforts to raise awareness of our products and benefits of rice bran products generally.
We are dependent on our ability to market products to animal food producers, food manufacturers, mass merchandisers, health food retailers and to other companies for use in their products. We must increase the level of awareness and benefits of rice bran products to be used in food and food ingredients in general and our products in particular. We will be required to devote substantial management and financial resources to these marketing and advertising efforts and such efforts may not be successful.
Our ability to adapt to sudden increases in demand of our product is limited by an adequate supply of raw rice bran and our ability to find additional facilities for production.
Many of our current products depend on our proprietary technology using raw rice bran, which is a by-product from milling paddy rice to white rice. Our ability to manufacture SRB is currently limited to the production capability of our equipment located at our two suppliers’ rice mills in California, our own plant located adjacent to our supplier in Mermentau, Louisiana and our rice mill in Wynne, Arkansas. At these facilities and our value-added product plant in Dillon, Montana, we currently are capable of producing enough finished products to meet current demand. If demand for our products were to increase dramatically in the future, we would need additional production capacity, which may take time and may expose us to additional long-term operating costs.
We may not be able to continue to secure adequate sources of raw rice bran to meet our future demand. Since rice bran has a limited shelf life, the supply of rice bran is affected by the amount of rice planted and harvested each year.
Adverse economic, weather, or other conditions may impact our supply and the price of rice, raw rice bran, stabilized rice bran, barley, and oats.
If economic or disruptionweather conditions, for example drought conditions in California or flooding in Arkansas and Louisiana, adversely affect the amount of rice planted or harvested, the cost of rice bran products that we use may increase. Drought or excessive moisture can have similar impacts on the timing and number of acres planted to the capabilities of our suppliers may impair our ability to manufacture and/or sell our products.barley and oats in Minnesota, North Dakota, and Manitoba as well. We are actively monitoring the recent novel coronavirus (COVID-19) outbreak and its potential impactnot always able to immediately pass cost increases to our customers. Therefore, cost increases could have an adverse effect on our supply chain andresults of operations. Current and future port closures and other restrictions resulting from the outbreak may restrict global supply, which may cause the price of raw materials used in our products to increase. We are unable to accurately predict the impact that COVID-19 will have due to various uncertainties, including the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and actions that governmental authorities may take.
We face competition from other companies that produce bran, grains and other alternative ingredients with similar benefits as our rice brans.
Competition in our targeted industries, including food ingredients, animal feed supplements and companion pet food ingredients is vigorous, with a large number of businesses engaged in the various industries. Many of our competitors have established reputations for successfully developing and marketing their products, including products that incorporate bran from other cereal grains and other alternative ingredients that are widely recognized as providing similar benefits as rice bran. In addition, many of our competitors have greater financial, managerial and technical resources than we do. If we are not successful in competing in these markets, we may not be able to attain our business objectives.
We are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints both domestically and abroad and our failure to comply with these laws, regulations and constraints could lead to the imposition of significant penalties or claims, which could harm our financial condition and operating results.
In both the U.S. and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, sale and storage of our products are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints may exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions. We are subject to regulation by one or more federal agencies including the U.S. Food and Drug Administration (FDA), the U.S. Federal Trade Commission and the U.S. Department of Agriculture (USDA), state and local authorities and foreign governmental agencies. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may negatively impact the marketing of our products, resulting in significant loss of sales revenues. Our failure to comply with these current and new regulations could lead to the imposition of significant penalties or claims, limit the production or marketing of any non-compliant products or advertising and could negatively impact our business.
Our warehousing and manufacturing facilities are subject to risks that may negatively affect our business and operations.
Our ability to make, store, and move our products is important to our success. Disruption to our manufacturing capabilities or to our storage capabilities, due to damage to our facilities or equipment, inability or delay in replacing parts or equipment, weather, natural disaster, fire, terrorism, pandemic, or other factors, could impair our ability to manufacture or distribute our products. If we fail to mitigate the possible impact of such events, or effectively manage them if they occur, they could adversely affect our business and results of operations. Such events could also require additional resources to restore our supply chain.
Our facilities are subject to laws and regulations administered by the FDA, USDA, the Occupational Safety and Health Administration, and other federal, state, and local governmental agencies relating to the production, storage, distribution, quality, and safety of food products and the health and safety of our employees. Our failure to comply with such laws and regulations could subject us to lawsuits, administrative penalties, and civil remedies, including fines, injunctions, and recalls of our products. Changes in such laws or regulations that impose additional requirements on us could increase the cost of operating our facilities, causing our results of operations to be adversely affected.
The recent global outbreak of the novel coronavirus outbreak (COVID-19)could harm our business and results of operations.
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread,During the second and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operationsthird quarters of many businesses. This outbreak could decrease spending, adversely affect2020, we observed a surge in demand for our product and harm our business and results of operations. It is not possiblenon-perishable food products such as rice due to pantry stocking in response to the COVID-19 pandemic, which made it difficult for us to economically source raw materials. This dynamic has subsequently stabilized, but current and future port closures and other restrictions resulting from the COVID-19 pandemic may further restrict global supply, renewing pressure on the price of raw materials used in our products to increase. Additionally, damage or disruption to the capabilities of our suppliers may also impair our ability to manufacture and/or sell our products. Because we cannot predict the duration or magnitudeimpact that the COVID-19 pandemic, including the spread of the adverse resultsvirus, the severity of the disease, the duration of the outbreak, and its effects on our business or results of operations atactions that governmental authorities may take, it is hard for us to quantify this time.
We may be subject to product liability claims and product recalls.
We sell food and nutritional products for animal and human consumption, which involves risks such as product contamination or spoilage, product tampering and other adulteration of food products. We may be subject to liability if the consumption of any of our products causes injury, illness or death. We maintain a product liability policy for $5.0 million per year in the aggregate. In addition, we may voluntarily recall products in the event of contamination or damage. A significant product liability judgment or a widespread product recall may cause a material adverse effect on our financial condition. Even if a product liability claim is unsuccessful, there may be negative publicity surrounding any assertion that our products caused illness or injury which could adversely affect our reputation with existing and potential customers.
Many of the risks of our business have only limited insurance coverage and many of our business risks are uninsurable.
Our business operations are subject to potential product liability, environmental, fire, employee, manufacturing, shipping and other risks. Although we have insurance to cover some of these risks, the amount of this insurance is limited and includes numerous exceptions and limitations to coverage. In the event we were to suffer a significant uninsured claim, our financial condition would be materially and adversely affected.
Our success depends in part on our ability to obtain, enforce and protect our licenses and other intellectual property rights for our products and technology.
Our success is dependent upon our ability to protect and enforce the trade secrets and trademarks that we have and to develop and obtain new patents and trademarks for future processes, machinery, compounds and products that we develop. The process of seeking patent protection may be long and expensive, and patents might not be issued or not be broad enough in scope. We may not be able to protect our technology adequately, and our competition may be able to develop similar technology that does not infringe or encroach upon any of our rights.
There currently are no claims or lawsuits pending or threatened against us regarding possible infringement claims, but infringement claims by third parties, or claims for indemnification resulting from infringement claims, could be asserted in the future or that such assertions, if proven to be accurate, could have a material adverse effect on our business, financial condition and results of operations. In the future, litigation may be necessary to protect our trade secrets or know-how or to defend against claimed infringement of the rights of others and to determine the scope and validity of the proprietary rights of others. Any litigation could result in substantial cost and diversion of our efforts and other resources, which could have a material adverse effect on our financial condition and results of operations. Adverse determinations in any litigation could result in the loss of our proprietary rights, subjecting us to significant liabilities to third parties, require us to seek licenses from third parties or prevent us from manufacturing or selling our systems, any of which could have a material adverse effect on our financial condition and results of operations. A license under a third party’s intellectual property rights might not be available to us on reasonable terms, if at all.
We are dependent on key employees.
Our success depends upon the efforts of our top management team and certain other key employees, including the efforts of our executive chairman, chief executivefinancial officer, and chief financial officer.the other members of the senior leadership team. Although we have written employment agreements with these employees, such individuals could die, become disabled, retire, or resign. In addition, our success is dependent upon our ability to attract and retain key management persons for positions relating to the marketing and distribution of our products. We may not be able to recruit and employ such executives at times and on terms acceptable to us. Also, volatility, lack of positive performance in our stock price and changes in our overall compensation program, including our equity incentive program, may adversely affect our ability to retain such key employees.
Our officers and directors have limited liability and have indemnification rights.
Our articles of incorporation and bylaws provide that we may indemnify our officers and directors against losses sustained or liabilities incurred which arise from any transaction in that officer’s or director’s respective managerial capacity, unless that officer or director violates a duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend or derived an improper benefit from the transaction.
Risks Relating to Our Stock
Our stock price is volatile.
The market price of our common stock has fluctuated significantly in the past and may continue to fluctuate significantly in the future. The market price of the common stock may continue to fluctuate in response to a number of factors, including:
● | fluctuations in our quarterly or annual operating results; |
● | fluctuations in the cost of raw rice bran; |
● | developments in our relationships with customers and suppliers; |
● | our ability to obtain financing; |
● | announcements of new products or product enhancements by us or our competitors; |
● | announcements of technological innovations or new systems or enhancements used by us or our competitors; |
● | the loss of services of one or more of our executive officers or other key employees; |
● | developments in our or our competitors’ intellectual property rights; |
● | adverse effects to our operating results due to the impairment of goodwill; |
● | failure to meet the expectation of securities analysts or the public; |
● | general economic and market conditions; |
● | our ability to expand our operations, domestically and internationally; |
● | the amount and timing of expenditures related to any expansion; |
● | litigation involving us, our industry or both; |
● | actual or anticipated changes in expectations by investors or analysts regarding our performance; and |
● | price and volume fluctuations in the overall stock market from time to time. |
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Our stock price is volatile and in prior years we have been the target of shareholder litigation. Any shareholder litigation brought against us in the future could result in substantial costs and divert our management’s attention and resources from our business.
We have significant “equity overhang” which could adversely affect the market price of our common stock and impair our ability to raise additional capital through the sale of equity securities.
As of March 20, 2020, 40,074,483February 25, 2021, 45,238,087 shares of common stock were outstanding, (including 116,528 shares of nonvested stock), 8,677,0247,295,442 shares of common stock were issuable upon exercise of our outstanding stock options and warrants, 213,524 shares of common stock were issuable upon conversion of preferred stock and 1,148,0621,881,803 shares of common stock issuable upon vesting of restricted stock units. The possibility that substantial amounts of our common stock may be sold by investors or the perception that such sales could occur, often called “equity overhang,” could adversely affect the market price of our common stock and could impair our ability to raise additional capital through the sale of equity securities in the future. The issuance of the additional shares upon an increase in our authorized shares of common stock would significantly increase the amount of our common stock outstanding and the amount of the equity overhang.
The authorization and issuance of preferred stock may have an adverse effect on the rights of holders of our common stock.
Our Board, without further action or vote by holders of our common stock, has the right to establish the terms, preference, rights and restrictions and issue shares of preferred stock. Any series of preferred stock could be issued with terms, rights, preferences and restrictions that could adversely affect the rights of holders of our common stock and thereby reduce the value of our common stock. The designation and issuance of preferred stock favorable to current management or shareholders could make it more difficult to gain control of our board of directors or remove our current management and may be used to defeat hostile bids for control which might provide shareholders with premiums for their shares. We have designated and issued five series of preferred stock that no longer remain outstanding. In addition, in February 2017, we designated a seventh series of preferred stock, Series G. As of March 24, 2020,February 25, 2021, 225 shares of Series G preferred stock remain outstanding. We may issue additional series of preferred stock in the future.
If we fail to comply with the continuing listing standards of The NASDAQ Capital Market, our securities could be delisted.
Our common stock is listed on the NASDAQ Capital Market under the symbol “RIBT”. For our common stock to continue to be listed on the NASDAQ Capital Market, we must meet the current NASDAQ Capital Market continued listing requirements, including maintaining a minimum of $2.5 million in shareholders’ equity and maintaining a minimum common stock bid price of $1.00.$1.00 (the “Minimum Bid Price Requirement”). If we were unable to meet these requirements, including, but not limited to, requirements to obtain shareholder approval of a transaction other than a public offering involving the sale or issuance equal to 20% or more of our common stock at a price that is less than the market value of our common stock, our common stock could be delisted from the NASDAQ Capital Market.
On July 27, 2020, we received a notification letter from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we failed to comply with the Minimum Bid Price Requirement for a period of 30 consecutive days. To regain compliance with this listing requirement, the closing bid price of our common stock was required to be at least $1.00 for 10 consecutive business days within 180 calendar days from the date of the notification, or by January 25, 2021 (the “Initial Compliance Date”). We did not regain compliance with the Minimum Bid Price Requirement by the Initial Compliance Date. We subsequently requested and obtained an extension of time to regain compliance with the Minimum Bid Price Requirement by July 26, 2021.
On February 18, 2021, we received a notice from Nasdaq notifying us that the Listing Qualifications Department had determined that we had regained compliance with the Minimum Bid Price Requirement and that the matter was now closed. We regained such compliance based on the closing bid price of our common stock from February 3, to February 17, 2021, which had been at $1.00 per share or greater.
There can be no assurance that we will be able to maintain compliance with the continued listing requirements for Nasdaq. If we fail to maintain compliance with any such continued listing requirement, there can also be no assurance that we will be able to regain compliance with any such continued listing requirement in the future or that our common stock will not be delisted from NASDAQ Capital Market in the future.
If our securities were to be delisted from the NASDAQ Capital Market, our securities could continue to trade on the over-the-counter bulletin board following any delisting from the NASDAQ Capital Market, or on the Pink Sheets, as the case may be. Any such delisting of our securities could have an adverse effect on the market price of, and the efficiency of the trading market for our securities, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and less coverage of us by securities analysts, if any. Also, if in the future we were to determine that we need to seek additional equity capital, it could have an adverse effect on our ability to raise capital in the public or private equity markets.
General Risks
We must comply with our contractual obligations.
We have numerous ongoing contractual obligations under various purchase, sale, supply, production and other agreements which govern our business operations. While we seek to comply at all times with these obligations, we may not be no assurance thatable to comply with the terms of all contracts during all periods of time, especially if there are significant changes in market conditions or our financial condition. If we will continueare unable to meetcomply with our material contractual obligations, there likely would be a material adverse effect on our financial condition and results of operations.
Compliance with corporate governance and public disclosure regulations may result in additional expenses.
In order to comply with laws, regulations and standards relating to corporate governance and public disclosure, including the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control - Integrated Framework”, and other regulations issued by the SEC, such as Dodd-Frank, we may need to invest substantial resources to comply with these continued listing requirementsevolving standards, and this investment would result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
Breaches of our information system security measures could disrupt our internal operations.
We are dependent upon information technology for the distribution of information internally and also to our customers and suppliers. This information technology is subject to theft, damage or interruption from a variety of sources, including but not limited to malicious computer viruses, security breaches and defects in design. Security breaches may result from employees’ failure to observe internal control protocols designed to protect the security of our network and the information on it, or solely from external intrusion despite our best efforts to protect our network and the information on it. Various measures have been implemented to manage our risks related to information system and network disruptions, but a system failure or breach of these measures could negatively impact our operations and financial results.
Our inability to successfully recover from a disaster or other Nasdaq compliance standardsbusiness continuity problem could cause material financial loss, regulatory actions, reputational harm or legal liability.
Should we experience a local or regional disaster or other business continuity problem, such as a terrorist attack, pandemic, security breach, power loss, telecommunications failure, earthquake, hurricane or other natural or man-made disaster, our continued success will depend, in part, on the future.
ITEMItem 1B. UNRESOLVED STAFF COMMENTSUnresolved Staff Comments
Not applicable.
We maintain various facilities that are used for manufacturing, warehousing, research and development, distribution and administrative functions. These facilities consist of both owned and leased properties. The following table summarizes the properties used to conduct our operations as of December 31, 2019:
Location | Status | Primary Use | ||
West Sacramento, California | Leased | Warehousing | ||
Mermentau, Louisiana | Owned | Manufacturing | ||
Lake Charles, Louisiana | Building – owned | Warehouse | ||
Land – leased | ||||
Dillon, Montana | Owned | Manufacturing | ||
The Woodlands, Texas | Leased | Administrative, corporate office | ||
Wynne, Arkansas | Owned | Manufacturing | ||
East Grand Forks, MN | Owned | Manufacturing |
Our corporate headquarters is located in The Woodlands, Texas, where we lease approximately 5,380 square feet of administrative office space.
We believe that all facilities are in good operating condition, the machinery and equipment are well-maintained, the facilities are suitable for their intended purposes and they have capacities adequate for current operations. TheAll properties are covered by insurance but insurance for the propertiesinsurance. Our property located in Lake Charles, Louisiana is subjectwas damaged by Hurricane Laura. We expect to high deductibles and limitations on damages due to tropical storms.
We currently are not a party to any material litigation or other material legal proceedings. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.
Not applicable.
PART II Price Range of Common Stock Our common stock is traded on the NASDAQ Capital Market under the symbol “RIBT.” Our CUSIP No. is 762831204. Holders As of Dividends We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain all future earnings for the expansion and operation of our business and do not anticipate paying cash dividends in the foreseeable future. Recent Sales of Unregistered Securities None Share Repurchases None Item 6. Selected Financial Data Not applicable. Item 7.Management’s Discussion and Analysis of See Note 3 of our Notes to Consolidated Financial Statements for a discussion of 2019 acquisitions. Unless otherwise noted, amounts and Results of Operations Revenues Gross losses were $2.5 million in 2020, compared to gross losses of $0.9 million in 2019. The SG&A was Operating losses were $11.3 million in 2020, compared to $14.6 million in 2019, and net losses from continuing operations were $11.7 million in 2020, compared to $13.7 million in 2019. There was $0.1 million of other expense, net, in 2020, compared to other income, net, of $0.9 million in 2019. In 2020, interest expense increased to $0.3 million as we incurred higher fees and interest expense related to an increase in average borrowings. Included in 2019 other income, net, was a $0.8 million gain from a settlement The COVID-19 pandemic is a worldwide health crisis that is adversely affecting the We have not had, and we do not expect, any of our facilities to be subject to government-mandated closures, and we have informed In April 2020, we applied for, and received, a $1.8 million SBA Paycheck Protection Program (PPP) loan as discussed further in Note 11 of the Notes to the Consolidated Financial Statements. We believe the funds from this loan enabled us to maintain our workforce levels during 2020 despite economic uncertainties related to our business resulting Liquidity, Going Concern and Capital Resources We used We We raised a total of $5.7 million in financing cash in 2020, compared to We funded our working capital Management believes that despite the multi-year history of Off-Balance Sheet Arrangements We have no off-balance sheet arrangements, other than operating leases with original terms of less than a year and 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. The accompanying consolidated financial statements have been prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in Note 2 to our Consolidated Financial Statements. Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. The following is a description of what we consider to be our most significant critical accounting policies. Inventories - Property and Impairment of Goodwill Intangible Revenue Recognition – We account for a contract with a customer when the written contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Substantially all of our revenue is derived by fulfilling customer orders for the purchase of our products under contracts which contain a single performance obligation, to supply continually defined quantities of product at fixed prices. We account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service. We recognize revenue at the point in time that control of the ordered product(s) is transferred to the customer, which is upon delivery to the customer, or its designee at our location, a customer location or other customer-designated delivery point. For substantially all of our contracts, control of the ordered product(s) transfers at our location. Amounts invoiced to customers for shipping and handling are reported as revenues and the related costs incurred to deliver product to the customer are reported as cost of goods sold. Revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders. Incidental items that are immaterial in the context of the contract are recognized as expense. Our contracts do not include a significant financing component. Not applicable. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of RiceBran Technologies Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of RiceBran Technologies and its subsidiaries (the Company) as of December 31, Basis for Opinion These financial statements are the responsibility of the We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Long-Lived Asset Impairment Assessment As described in Notes 8 and 9 to the financial statements, the Company’s net consolidated property and equipment and intangible assets balances were $16,367,000 and $722,000, respectively, at December 31, 2020. As further described in Note 2 to the financial statements, the Company reviews long-lived assets, including property and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the asset. Based on events occurring during the year ended December 31, 2020, management performed an impairment assessment to test long-lived assets for impairment. The results of this assessment indicated that estimated future cash flows exceed the carrying amount of the assets. The Company’s impairment assessment required management to make significant estimates and assumptions related to a number of factors, including forecasts of revenue growth rates and cash flows. We identified the long-lived asset impairment assessment as a critical audit matter because changes in certain significant assumptions management used in the impairment analysis, including revenue growth rates and operating margins, could have a significant impact on the analysis. Auditing these assumptions involved a high degree of auditor judgment and subjectivity and increased audit effort. Our audit procedures related to the Company’s long-lived asset impairment assessment included the following, among others: ● We obtained an understanding of the relevant controls related to the development of forecasted revenue growth rates and operating margins. ● We tested the reasonableness of management’s process for determining the forecasts of revenue growth rates and operating margins. ● We tested the reasonableness of management’s estimates of revenue growth rates and operating margins by comparing management’s prior forecast to historical results for the Company, comparing the projections for consistency to the Company’s strategic plans and initiatives and comparing the projections to industry forecasts. ● We evaluated whether the estimates of revenue growth rates and cash flows were consistent with evidence obtained in other areas of the audit. /s/ RSM US LLP We have served as the Houston, Texas February 25, 2021 RiceBran Technologies December 31, (in thousands, except shareamounts) 2020 2019 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $9 and $347 Inventories Other current assets Total current assets Property and equipment, net Operating lease right-of-use assets Goodwill Intangible assets Other long-term assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable Commodities payable Accrued salary, wages and benefits Accrued expenses Customer prepayments Operating lease liabilities, current portion Due under insurance premium finance agreements Due under factoring agreement 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 Total liabilities 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 Common stock, no par value, 150,000,000 shares authorized, 45,238,087 shares and 40,074,483 shares, issued and outstanding Accumulated deficit Total shareholders' equity Total liabilities and shareholders' equity See Notes to Consolidated Financial Statements RiceBran Technologies Years Ended December 31, (in thousands, except share and per share amounts) 2020 2019 Revenues Cost of goods sold Gross loss Selling, general and administrative expenses Loss (gain) on disposition and involuntary conversion of property and equipment Operating loss Other income (expense): Interest expense Interest income Other income Other expense Total other income (expense) Loss before income taxes Income tax expense Loss from continuing operations Loss from discontinued operations Net loss Basic loss per common share: Continuing operations Discontinued operations Basic loss per common share Diluted loss per common share: Continuing operations Discontinued operations Diluted loss per common share Weighted average number of shares outstanding: Basic Diluted See Notes to Consolidated Financial Statements RiceBran Technologies Years Ended December 31, (in 2020 2019 Net loss Derivative financial instruments designated as cash flow hedges: Losses arising during the period Reclassification of losses realized to cost of goods sold Net other comprehensive income Comprehensive loss See Notes to Consolidated Financial StatementsITEMItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarch 20, 2020,February 25, 2021, there were approximately 232218 holders of record and 6,5726,600 beneficial owners of our common stock.During the quarter ended December 31, 2019, 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)the Securities ActFinancial Condition and Results of 1933, as amended. The issuance below was made without any public solicitation, to a limited number of persons and were acquired for investment purposes only.On October 7, 2019, we issued 85,409 shares of common stock upon the exercise of a warrant for $81,933.Share RepurchasesOperationSWe did not repurchase any of our common stock in 2019.Not applicable.2018 acquisitions.
Years Ended December 31 2019 2018 (in thousands) Revenues $ 23,713 $ 14,762 60.6 Cost of goods sold 24,574 11,780 (108.6 ) Gross profit (loss) (861 ) 2,982 Gross profit % -3.6 % 20.2 % Selling, general and administrative expenses 13,696 11,194 (22.4 ) Loss from operations (14,557 ) (8,212 ) (77.3 ) Other income (expense): Interest expense (96 ) (12 ) Interest income 50 - Other, net 868 168 Total other (expense) income 822 156 Loss before income taxes $ (13,735 ) $ (8,056 ) increased $9.0were $26.2 million in 2020, an increase of $2.5 million, or 61%10.5%, in 2019 compared to the prior year, with overall growth supported by the acquisition of$23.7 million in 2019. The increase in revenue year-over-year was due to higher revenues from MGI and Golden Ridge, offset by a small decline in November 2018, andrevenue from our RBT operations. Higher revenue from MGI Grainwas the greatest factor driving overall revenue growth in 2020. MGI was acquired in April 2019. Food product2019, and therefore, our revenues increased 97% year over year, primarily due toincluded no MGI revenue in the additionfirst quarter of new products for human consumption from2019, while Golden Ridge and MGI Grain. Animal feed product revenues increased 10%. Animal feed productgenerated positive year-over-year revenue growth was primarily due to increased buying from our existing SRB customer base.Gross profit percentage decreased 23.8 percentage points to negative 3.6% in 2019 from 20.2% in the prior year.first and fourth quarters of 2020.decreaseincrease in gross profitlosses was primarily attributable to operatinghigher losses at Golden Ridge due to an unfavorable contract to sell medium grain rice entered into by the seller of the mill andincreases in input commodity prices, low levels of plant utilizationproductivity, and unmet production targets, which added $0.8 million in expenses related to contract settlements. These dynamics were particularly impactful in the latter halfsecond and third quarters of the year while the mill2020. Gross losses in 2020 were also negatively impacted by a decline in gross profit for our RBT operations, offset in part by a higher gross profit contribution from MGI.going through$8.0 million in 2020, a planned upgrade cycle. With this project completed in early January 2020, we expectdecline of $5.7 million, or 41.8%, compared to see improved productivity and a positive contribution margin from Golden Ridge in 2020.Selling, general and administrative (SG&A) expenses were $13.7 million in 2019, compared to $11.2 million2019. The decline in 2018, an increase of $2.5 million, or 22.4%. Outside services increased $1.1 million in 2019, compared to the prior year, primarily as a result of higher outside accounting, legal and professional fees associated with the acquisition of Golden Ridge and MGI Grain. Salary, wages and benefit related expenses increased $1.1 million in 2019, compared to the prior year, driven substantially by equity grants and outside labor costs. Bad debt expense increased $0.2 million and rent expense increased $0.1 million in 2019, compared to the prior year.Other, net was $0.9 million for 2019 compared to $0.2 million in 2018. This increaseSG&A was primarily related to thelower personnel expenses and a reduction in outside services and consultant fees, as well as productivity gains in corporate support functions. Losses on disposition of property and equipment were $0.8 million in 2020, compared to $0.0 million in 2019. Losses on disposition of property and equipment included a $0.1 million loss due to hurricane damage to a facility in Louisiana. of a net working capital dispute and other issues with the sellersellers of Golden Ridge.Covid-19COVID-19 AssessmentSubsequent to RiceBran Technologies’ fiscal year ending December 31, 2019,United States experienced an outbreakbusiness and financial markets of a novel coronavirus (COVID-19), which has been declared a “pandemic” bymany countries. The pandemic could adversely affect the World Health Organization. This pandemicdemand for our products, and it poses the risk that we, or our customers, suppliers, and other business partners may be disrupted or prevented from conducting business activities for certain periodsan uncertain period of time, the durations oftime. The extent to which this would impact our financial results is unknown as it is dependent on future developments, which are highly uncertain.RiceBran Technologies has As such, it is difficult to estimate the exact magnitude of the COVID-19 pandemic on our business.itsour customers that at this time we anticipate operating throughout the COVID-19 outbreak. Our locations have fewer than 15 people on site at once,Disruption in the supply chain of raw materials used to produce our products, as a result of the COVID-19 outbreak, has not caused us to close any of our facilities, and all employees have been trained on COVID-19 byto date, our Occupational Health & Safety Manager, as well as being cross-trained to backfill in one another’s absence in accordance with GFSI requirements. We are also limiting visitors to all facilities, have cancelled all non-essential travel, and shifted many employees to working remotely. Our employees have been reporting to work, either remotely or in-person without any material changeschange in attendance or productivity. However, we cannot ensure that the COVID-19 outbreak will not cause disruptions to our business in the future.changes in our productivity due tofrom the COVID-19 outbreak. We currently do not expect any of our facilitiesThe loan and accrued interest were to be subject to government-mandated closures.forgivable, provided that the loan proceeds were used for the purpose of maintaining workforce levels. The COVID-19 outbreak has not yet caused any material disruptionloan and related accrued interest were completely forgiven in the supply of raw materials used in our products or in the distribution of our products.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 will adversely affect the demand for our products. However, we are not able to estimate the exact magnitude of the impact of such developments on 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.See Note 1 of our Notes to Consolidated Financial Statements for a discussion of liquidity.Cash used in operating activities of continuing operations is presented below (in thousands). Year Ended December 31 2019 2018 Cash flow from operating activities of continuing operations: Loss from continuing operations $ (13,735 ) $ (8,101 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,930 773 Stock and share-based compensation 1,360 886 Settlement with Sellers of Golden Ridge (849 ) - Provision for bad debts 472 - Other 13 (14 ) Changes in operating assets and liabilities: Accounts receivable (1,102 ) 331 Inventories 332 (138 ) Accounts payable and accrued expenses (296 ) 935 Commodities payable (1,340 ) 176 Other (235 ) (89 ) Net cash used in operating activities of continuing operations $ (13,450 ) $ (5,241 ) $13.5$7.9 million in operating cash during 2019,in 2020, compared to $5.2$13.5 million ofin 2019. The reduction in operating cash uses in 2018. 2020 reflected lower net operating losses, higher depreciation and amortization, and lower investment in working capital, with higher inventories and accounts payable, offset by a reduction in commodities payable and accounts receivable.also funded $4.4used $0.9 million in investing cash during in 2020, compared to $8.0 million in 2019. Investing cash in 2019 included $3.8 million associated with the acquisition of MGI. Total capital expenditures were $1.2 million in 2020, compared with $4.2 million in capital expenditures in 2019,2019.$3.3$23.1 million in 2019. On March 30, 2020, we entered into an at-the-market (ATM) issuance sales agreement under which we may offer and sell shares of our common stock. As discussed further in Note 11 of the prior year. TheseNotes to the Consolidated Financial Statements, i) in April 2020, we obtained a $1.8 million SBA Payroll Protection Program (PPP) loan and ii) in July 2020, we secured a $2.0 million mortgage on our rice mill in Wynne, Arkansas. As further discussed in Note 12 of the Notes to the Consolidated Financial Statements, in the second half of 2020, we received net proceeds of $2.3 million under the ATM agreement. The PPP loan was forgiven in January 2021.expenditures relateneeds in 2020 primarily towith funds received from the sale of receivables under our capacity expansion and debottlenecking at Golden Ridge, leasehold improvements at our Riverside facility, and our specialty ingredients’ equipment in our Dillon plant. Offsetting these uses of cash was $19.4 million offactoring agreement, supplemented by proceeds from issuancesthe PPP loan, mortgage note and stock offering.common stockoperating losses and negative operating cash flows from continuing operations, there is no substantial doubt about our ability to continue as a prefunded warrant, as well as $2.2going concern within one year after the date that these financial statements are issued. Factors alleviating this doubt include the reduction in operating losses in the second half of 2020, $5.3 million of proceeds from option and warrant exercises.As of December 31, 2019, ourin cash and cash equivalents balance was $8.4 million (see Note 1), compared to $7.0 million and $0.2 million of restricted cash as of December 31, 2018. As2020, a nearly 42% reduction in annual SG&A, and our ability to procure addition capital if needed through a variety of December 31, 2019, management believes the Company has sufficient capital reserves and borrowing capacity to fund the operations of the business; however, we may seek external sources of funding for investment initiatives and/or general operations if we determine that is the best course of action.Equipmentlong-lived assetsLong-lived Assets - Assets,Assets, exclusive of goodwill20192020 and 2018,2019, the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.Company’sCompany's auditor since 2018.March 24, 20202019 2020 and 2018 $ 5,263 $ 8,444 2,819 3,738 1,878 898 1,380 691 11,340 13,771 16,367 19,077 2,452 2,752 3,915 3,915 722 950 - 27 $ 34,796 $ 40,492 $ 955 $ 833 825 829 601 877 536 884 - 12 344 309 126 116 1,785 1,823 82 101 572 28 5,826 5,812 2,330 2,674 113 190 3,107 73 11,376 8,749 112 112 322,218 318,811 (298,910 ) (287,180 ) 23,420 31,743 $ 34,796 $ 40,492 2019 2018 ASSETS Current assets: Cash and cash equivalents $ 8,444 $ 7,044 Restricted cash - 225 Accounts receivable, net of allowance for doubtful accounts of $347 and $14 3,738 2,529 Receivable from sellers of Golden Ridge - working capital adjustment to purchase price - 1,147 Inventories 898 958 Other current assets 691 610 Total current assets 13,771 12,513 Property and equipment, net 19,077 15,010 Operating lease right-of-use assets 2,752 - Goodwill 3,915 3,178 Intangible assets 950 16 Other long-term assets 27 - Total assets $ 40,492 $ 30,717 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 833 $ 1,583 Commodities payable 829 2,735 Accrued salary, wages and benefits 877 933 Accrued expenses 1,000 520 Customer prepayments 12 145 Operating lease liabilities, current portion 309 - Finance lease liabilities, current portion 101 45 Payable to purchaser of HN - working capital adjustment to purchase price - 259 Note payable to seller of Golden Ridge - 609 Due under factoring agreement 1,823 - Long-term debt, current portion 28 32 Total current liabilities 5,812 6,861 Operating lease liabilities, less current portion 2,674 - Finance lease liabilities, less current portion 190 86 Long-term debt, less current portion 73 59 Total liabilities 8,749 7,006 Commitments and contingencies Shareholders’ equity: Preferred stock, 20,000,000 shares authorized: Series G, convertible, 3,000 shares authorized, stated value $225 and $450, 225 shares and 405 shares, issued and outstanding 112 201 318,811 296,739 Accumulated deficit (287,180 ) (273,229 ) Total shareholders’ equity 31,743 23,711 Total liabilities and shareholders’ equity $ 40,492 $ 30,717 20192020 and 2018 $ 26,199 $ 23,713 28,670 24,574 (2,471 ) (861 ) 7,971 13,700 847 (4 ) (11,289 ) (14,557 ) (318 ) (96 ) 20 50 4 884 (128 ) (16 ) (422 ) 822 (11,711 ) (13,735 ) (19 ) - (11,730 ) (13,735 ) - (216 ) $ (11,730 ) $ (13,951 ) $ (0.29 ) $ (0.42 ) - (0.01 ) $ (0.29 ) $ (0.43 ) $ (0.29 ) $ (0.42 ) - (0.01 ) $ (0.29 ) $ (0.43 ) 41,131,782 32,359,316 41,131,782 32,359,316 2019 2018 Revenues Cost of goods sold Gross (loss) profit Selling, general and administrative expenses Operating loss Other income (expense): Total other income Loss before income taxes Income tax expense Loss from continuing operations Loss from discontinued operations Net loss Basic loss per common share: Basic loss per common share Diluted loss per common share: Diluted loss per common share Weighted average number of shares outstanding: 20192020 and 2018thousands, except share amounts)thousands) $ (11,730 ) $ (13,951 ) (57 ) - 57 - - - $ (11,730 ) $ (13,951 ) Shares Common Equity Balance, January 1, 2018 630 18,046,731 $ 313 $ 279,548 $ (265,128 ) $ 14,733 Common stock awards under equity incentive plans - 312,556 - 790 - 790 Exercise of common stock options - 32,500 - 28 - 28 Conversion of preferred stock into common stock (225 ) 213,523 (112 ) 112 - - Exercise of common stock warrants - 8,826,230 - 11,106 - 11,106 Acquisition of Golden Ridge - 1,666,667 - 5,000 - 5,000 Other - - - 155 - 155 Net loss - - - - (8,101 ) (8,101 ) Balance, December 31, 2018 405 29,098,207 201 296,739 (273,229 ) 23,711 - 9,831,668 - 19,422 - 19,422 Exercise of Prefunded Warrant - 1,003,344 - 10 - 10 Common stock awards under equity incentive plans - 289,349 - 1,360 - 1,360 Exercise of common stock options - 165,812 - 156 - 156 Conversion of preferred stock into common stock (180 ) 170,818 (89 ) 89 - - Exercise of common stock warrants - 685,409 - 2,062 - 2,062 Retirement of unvested shares - (830,124 ) - - - - - (340,000 ) - (1,027 ) - (1,027 ) Net loss - - - - (13,951 ) (13,951 ) Balance, December 31, 2019 225 40,074,483 $ 112 $ 318,811 $ (287,180 ) $ 31,743
RiceBran Technologies
Years Ended December 31, 20192020 and 2018
(in thousands)thousands, except share amounts)
Shares | ||||||||||||||||||||||||
Preferred | Common | Accumulated | ||||||||||||||||||||||
Series G | Common | Stock | Stock | Deficit | Equity | |||||||||||||||||||
Balance, January 1, 2019 | 405 | 29,098,207 | $ | 201 | $ | 296,739 | $ | (273,229 | ) | $ | 23,711 | |||||||||||||
Sales of common stock and Prefunded Warrant, net of costs | - | 9,831,668 | - | 19,422 | - | 19,422 | ||||||||||||||||||
Exercise of Prefunded Warrant | - | 1,003,344 | - | 10 | - | 10 | ||||||||||||||||||
Common stock awards under equity incentive plans | - | 289,349 | - | 1,360 | - | 1,360 | ||||||||||||||||||
Exercise of common stock options | - | 165,812 | - | 156 | - | 156 | ||||||||||||||||||
Conversion of preferred stock into common stock | (180 | ) | 170,818 | (89 | ) | 89 | - | - | ||||||||||||||||
Exercise of common stock warrants | - | 685,409 | - | 2,062 | - | 2,062 | ||||||||||||||||||
Retirement of unvested shares | - | (830,124 | ) | - | - | - | - | |||||||||||||||||
Retirement of shares received in settlement with sellers of Golden Ridge | - | (340,000 | ) | - | (1,027 | ) | - | (1,027 | ) | |||||||||||||||
Net loss | - | - | - | - | (13,951 | ) | (13,951 | ) | ||||||||||||||||
Balance, December 31, 2019 | 225 | 40,074,483 | 112 | 318,811 | (287,180 | ) | 31,743 | |||||||||||||||||
Sales of common stock, net of costs | - | 4,850,489 | - | 2,318 | - | 2,318 | ||||||||||||||||||
Common stock awards under equity incentive plans | - | 214,234 | - | 1,041 | - | 1,041 | ||||||||||||||||||
Exercise of common stock warrants | - | 67,577 | - | 12 | - | 12 | ||||||||||||||||||
Common stock issued to vendors | - | 31,304 | - | 36 | - | 36 | ||||||||||||||||||
Net loss | - | - | - | - | (11,730 | ) | (11,730 | ) | ||||||||||||||||
Balance, December 31, 2020 | 225 | 45,238,087 | $ | 112 | $ | 322,218 | $ | (298,910 | ) | $ | 23,420 | |||||||||||||
| 2019 | 2018 | |||||||
| Cash flow from operating activities: | ||||||||
| Net loss | $ | (13,951 | ) | $ | (8,101 | ) | ||
| Loss from discontinued operations | 216 | - | ||||||
| Loss from continuing operations | (13,735 | ) | (8,101 | ) | ||||
| Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | ||||||||
| Depreciation | 1,899 | 726 | ||||||
| Amortization | 31 | 47 | ||||||
| Stock and share-based compensation | 1,360 | 886 | ||||||
| Settlement with sellers of Golden Ridge | (849 | ) | - | |||||
| Provision for bad debts | 472 | - | ||||||
| Other | 13 | (14 | ) | |||||
| Changes in operating assets and liabilities (net of acquisitions): | ||||||||
| Accounts receivable | (1,102 | ) | 331 | |||||
| Inventories | 332 | (138 | ) | |||||
| Accounts payable and accrued expenses | (296 | ) | 935 | |||||
| Commodities payable | (1,340 | ) | 176 | |||||
| Other | (235 | ) | (89 | ) | ||||
| Net cash used in operating activities | (13,450 | ) | (5,241 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Acquisition of MGI | (3,777 | ) | - | |||||
| Purchases of property and equipment | (4,219 | ) | (3,248 | ) | ||||
| Acquisition of Golden Ridge, net of cash acquired | - | (1,862 | ) | |||||
| Disbursement of notes receivable | - | (475 | ) | |||||
| Net cash used in investing activities - continuing operations | (7,996 | ) | (5,585 | ) | ||||
| Net cash used in investing activities - discontinued operations | (475 | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuances of common stock and Prefunded Warrant, net of issuance costs | 19,422 | - | ||||||
| Proceeds from common stock warrant exercises | 2,072 | 11,106 | ||||||
| Proceeds from common stock option exercises | 156 | 28 | ||||||
| Payments of long-term debt and finance lease liabilities | (363 | ) | (16 | ) | ||||
| Proceeds from margin loan | 1,853 | - | ||||||
| Payments of margin loan | (1,853 | ) | - | |||||
| Advances on factoring agreement | 5,134 | - | ||||||
| Payments on factoring agreement | (3,325 | ) | - | |||||
| Other | - | (1 | ) | |||||
| Net cash provided by financing activities | 23,096 | 11,117 | ||||||
| Net change in cash and cash equivalents and restricted cash | $ | 1,175 | $ | 291 | ||||
| Cash and cash equivalents and restricted cash, beginning of period | ||||||||
| Cash and cash equivalents | $ | 7,044 | $ | 6,203 | ||||
| Restricted cash | 225 | 775 | ||||||
| Cash and cash equivalents and restricted cash, beginning of period | 7,269 | 6,978 | ||||||
| Cash and cash equivalents and restricted cash, end of period | ||||||||
| Cash and cash equivalents | 8,444 | 7,044 | ||||||
| Restricted cash | - | 225 | ||||||
| Cash and cash equivalents and restricted cash, end of period | 8,444 | 7,269 | ||||||
| Net change in cash and cash equivalents and restricted cash | $ | 1,175 | $ | 291 | ||||
| Supplemental disclosures: | ||||||||
| Cash paid for interest | $ | 81 | $ | 10 | ||||
See Notes to Consolidated Financial Statements
RiceBran Technologies
Consolidated Statements of Cash Flows
Years Ended December 31, 2020 and 2019
(in thousands)
2020 | 2019 | |||||||
Cash flow from operating activities: | ||||||||
Net loss | $ | (11,730 | ) | $ | (13,951 | ) | ||
Loss from discontinued operations | - | 216 | ||||||
Loss from continuing operations | (11,730 | ) | (13,735 | ) | ||||
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | ||||||||
Depreciation | 2,393 | 1,899 | ||||||
Amortization | 228 | 31 | ||||||
Stock and share-based compensation | 1,077 | 1,360 | ||||||
Loss (gain) on disposition and involuntary conversion of property and equipment | 847 | (4 | ) | |||||
Settlement with sellers of Golden Ridge | - | (849 | ) | |||||
Provision for (recovery of) doubtful accounts | (82 | ) | 472 | |||||
Other | 93 | 17 | ||||||
Changes in operating assets and liabilities (net of acquisitions): | ||||||||
Accounts receivable | 997 | (1,102 | ) | |||||
Inventories | (980 | ) | 332 | |||||
Accounts payable and accrued expenses | (709 | ) | (327 | ) | ||||
Commodities payable | (4 | ) | (1,340 | ) | ||||
Other | (76 | ) | (235 | ) | ||||
Net cash used in operating activities | (7,946 | ) | (13,481 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (1,184 | ) | (4,219 | ) | ||||
Proceeds from insurance on involuntary conversion | 250 | - | ||||||
Proceeds from sale of property and equipment | 15 | - | ||||||
Acquisition of MGI | - | (3,777 | ) | |||||
Net cash used in investing activities - continuing operations | (919 | ) | (7,996 | ) | ||||
Net cash used in investing activities - discontinued operations | - | (475 | ) | |||||
Cash flows from financing activities: | ||||||||
Advances on factoring agreement | 27,450 | 5,134 | ||||||
Payments on factoring agreement | (27,583 | ) | (3,325 | ) | ||||
Advances on insurance premium finance agreements | 743 | 643 | ||||||
Payments on insurance premium finance agreements | (733 | ) | (612 | ) | ||||
Advances on long-term debt and finance lease liabilities, net of issuance costs | 3,762 | - | ||||||
Payments of long-term debt and finance lease liabilities | (285 | ) | (363 | ) | ||||
Proceeds from margin loan | - | 1,853 | ||||||
Payments of margin loan | - | (1,853 | ) | |||||
Proceeds from issuances of common stock and Prefunded Warrant, net of issuance costs | 2,318 | 19,422 | ||||||
Proceeds from common stock warrant exercises | 12 | 2,072 | ||||||
Proceeds from common stock option exercises | - | 156 | ||||||
Net cash provided by financing activities | 5,684 | 23,127 | ||||||
Net change in cash and cash equivalents and restricted cash | $ | (3,181 | ) | $ | 1,175 | |||
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 | 5,263 | 8,444 | ||||||
Restricted cash | - | - | ||||||
Cash and cash equivalents and restricted cash, end of period | 5,263 | 8,444 | ||||||
Net change in cash and cash equivalents and restricted cash | $ | (3,181 | ) | $ | 1,175 | |||
Supplemental disclosures: | ||||||||
Cash paid for interest | $ | 223 | $ | 81 | ||||
Cash paid for income taxes | $ | 7 | $ | - | ||||
See Notes to Consolidated Financial Statements
RiceBran Technologies
Notes to Consolidated Financial Statements
NOTE1. LIQUIDITYAND MANAGEMENT’S PLAN
The Company’s multi-year history of operating losses and negative operating cash flows from our continuing operations there is noraised substantial doubt about ourthe Company’s ability to continue as a going concern before consideration of management’s plans, however after consideration of management’s plans and the factors below, the Company believes substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.issued has been alleviated. The factors that alleviated the substantial doubt are summarized below:
1) | Significant Cash Reserves – As of December 31, 2020, the Company had $5.3 million in cash and cash equivalents. |
2) | Declining Operating Losses – During the second half of 2020, the Company generated a progressive decline in both operating losses and negative operating cash flows, driven by: |
● | Changes in senior leadership to bring increased transparency and greater accountability to performance achievement. |
● | Improvements in revenue trends and a reduction in gross losses due to stronger execution, which the Company expects to continue. |
● | A sustainable 40%+ reduction in SG&A, from cuts in headcount and lower expenditures on outside services and consultants. |
● | Improvements in working capital due to rising account receivables and commodity payables balances. |
3) | Access to Equity Funding – During the second half of 2020, the Company raised $2.4 million through its ATM facility, despite having a share price below $1.00 and receiving a Nasdaq delisting notice. Subsequently, on February 17, 2021, the Company received a letter from Nasdaq confirming that it had regained compliance with this requirement. After raising $2.4 million the Company has $3.6 million in capacity remaining under its $6 million universal Shelf Registration Statement on Form S-3. |
4) | Ability to Leverage and/or Sell Real-estate Assets – The Company operates three wholly owned facilities (Mermentau LA, Dillon MT, and North Grand Forks MN) with no existing liens. Such facilities could potentially be sold or mortgaged to provide additional liquidity. |
NOTE 2. 2.BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
We are a specialty ingredient company focused on producing value-added processingthe development, production, and marketing of healthy, natural and nutrient dense products derived from ricetraditional and otherancient small grains,grains. We create and the by-products created in the millingproduce products utilizing proprietary processes to deliver improved nutrition, ease of these grains. 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 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, soybeans, wheat, and soybeans.yeast. Our SRB and refined 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 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 since November 2018, our first company-ownedown rice mill in Wynne, Arkansas. At our Dillon, Montana facility, we produce SRB basedSRB-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. In April 2019, we purchased arice, and our grain processing facility in East Grand Forks, Minnesota, to expand the mills a variety of grainstraditional, and ancient, small grains.
Segment Reporting
An operating segment is defined as a component of a business for which we can offerseparate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and evaluate performance. The “Segment Reporting” topic of the market.FASB ASC requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company has one reporting unit and one operating segment, specialty ingredients.
RiceBran Technologies
Notes to Consolidated Financial Statements
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 and/or have a significant financial impact on us.
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(ASU 2016-13), which changedchanges 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, andor cash flows.
Recently adopted accounting standards
In December 18, 2019, the FASB issued Accounting Standards Update (ASU)guidance ASU No. 2019-12 Simplifying - Income Taxes(Topic 740): Simplifying the Accounting for IncomeTaxes as part of its simplification initiative (i.e., its effort to reducewhich, among other things, removed an exception in the complexity of accounting standards). The ASU is intended to remove certain exceptionsguidance to the general principles in current GAAP, reduce the costincremental approach for intraperiod tax allocation when there is a loss from continuing operations and complexity in accounting for income taxes, and improve financial statement preparers’ application of income tax-related guidance. This guidance does not create new accounting requirements. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, withor a gain from other items such as discontinued operations. We early adoption permitted. We are evaluating the impact of and approach to adopting this amended accounting guidance on our consolidated financial statements.
Summary of Significant Accounting Policies
Basis ofof Presentation and Principles of Consolidation
Use of Estimates
– The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Because of the uncertainty inherent in such estimates, actual results could differ from those estimates.Reclassifications
– Certain reclassifications have been made to amounts reported for the prior year to achieve consistent presentation with the current year.Cash and Cash Equivalents
– We consider all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. In all periods presented, we maintained our cash and cash equivalents with major banks. We maintain cash in bank accounts in amounts which at times may exceed federally insured limits. At times we invest in money market funds which are also not federally insured. We have not experienced any losses on such accounts.Accounts Receivable and Allowance for Doubtful Accounts
– Accounts receivable represent amounts receivable on trade accounts. The allowance for doubtful accounts is based on our assessment of the collectability of customer accounts and the aging of accounts receivable. We analyze the aging of customer accounts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts. From period to period, differences in judgments or estimates utilized may result in material differences in the amount and timing of the provision for doubtful accounts. We periodically evaluate our credit policy to ensure that customers are worthy of terms and support our business plans. We generally do not require collateral.RiceBran Technologies
Notes to Consolidated Financial Statements
Inventories –Inventories are stated at the lower of cost or net realizable value. We employ a full absorption procedure using standard cost techniques for the majority of our operations. The standards are customarily reviewed and adjusted so that they are materially consistent with actual purchase and production costs. Provisions for potentially obsolete or slow-moving inventory are made based upon our analysis of inventory levels, historical obsolescence and future sales forecasts, while inventory determined to be obsolete is written off immediately.
Property and Equipment
– Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets. Expenditures for maintenance and repairs are expensed as incurred while renewals and betterments are capitalized. Gains or losses on the sale of property and equipment are reflected in net income (loss).We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the undiscounted future cash flows estimated to be generated by the asset to be held and used are not sufficient to recover the unamortized balance of the asset. An impairment loss is recognized based on the difference between the carrying value and estimated fair value. The estimated fair value is determined based on either the discounted future cash flows or other appropriate fair value methods with the amount of any indicated deficiency charged to operations in the current year. Estimates of future cash flows are based on many factors, including current operating results, expected market trends and competitive influences. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell.
Goodwill
– Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we conclude that is the case, or chose to not perform the qualitative assessment, we quantify the reporting unit’s fair value. If the carrying amount of the reporting unit exceeds its fair value, we record an impairment loss based on the difference. The impairment loss will be limited to the amount of goodwill allocated to that reporting unit. Multiple valuation techniques may be used to assess the fair value of the reporting unit. All of these techniques include the use of estimates and assumptions that are inherently uncertain. Changes in these estimates and assumptions could materially affect the determination of fair value or goodwill impairment, or both.Intangible Assets, exclusive Assets, Exclusive of goodwill
Leases
–We recognize right-of-use assets and lease liabilities based on the present value of the future minimum lease payments over the lease term, beginning at the commencement date, for leases exceeding a year. Minimum lease payments include the fixed lease components of the lease and any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Lease terms may include options to renew when it is reasonably certain that we will exercise that option. We combine lease and nonlease components and account for them as a single lease component. Certain leases contain rent escalation clauses, rent holidays, capital improvement funding or other lease concessions.
RiceBran Technologies
Notes to Consolidated Financial Statements
In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease. When we cannot readily determine the discount rate implicit in a lease, we utilize our incremental borrowing rate, the rate of interest that we would incur to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. To estimate the incremental borrowing rate, we reference a market yield curve consistent with our assessment of our credit quality.
We recognize operating lease expense related to the minimum lease payments on a straight-line basis over the lease term. For finance leases, we recognize amortization expense related to the minimum lease payments on a straight-line basis over the lease term while interest expense is recognized using the effective interest method. Expense related to variable lease payments that do not depend on a rate or index and short-term rentals, on leases with terms less than a year, are expensed as incurred.
Revenue Recognition
– We account for a contract with a customer when the written contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Substantially all of our revenue is derived by fulfilling customer orders for the purchase of our products under contracts which contain a single performance obligation, to supply continually defined quantities of product at fixed prices. We account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service. We recognize revenue at the point in time that control of the ordered product(s) is transferred to the customer, which is upon delivery to the customer, or its designee at our location, a customer location or other customer-designated delivery point. For substantially all of our contracts, control of the ordered product(s) transfers at our location. Amounts invoiced to customers for shipping and handling are reported as revenues and the related costs incurred to deliver product to the customer are reported as cost of goods sold.Revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders. Incidental items that are immaterial in the context of the contract are recognized as expense. Our contracts do not include a significant financing component.
Our contracts may include terms that could cause variability in the transaction price, including, for example, rebates and volume discounts, or other forms of contingent revenue. The amount of consideration we expect to receive and revenue we recognize includes estimates of variable consideration, including costs for rebates and discounts. If the consideration promised in a contract includes a variable amount, we estimate the amount to which we expect to be entitled using either the expected value or most likely amount method. Changes in judgments and estimates regarding probability of collection and variable consideration might result in a change in the timing or amount of revenue recognized.Incremental costs of obtaining a revenue contract are capitalized and amortized on a straight-line basis over the expected customer relationship period if we expect to recover those costs. As a practical expedient, we expense costs to obtain a contract as incurred if the amortization period would have been a year or less. Typically, costs to incur revenue contracts are not significant.
Selling, General and Administrative Expenses
– Selling, general and administrative expenses include salaries and wages, bonuses and incentives, share-based compensation expense, employee-related expenses, facility-related expenses, marketing and advertising expense, depreciation of non-operating property and equipment, professional fees, amortization of intangible assets, provisions for losses on accounts receivable and other operating expenses.Research and Development
– Research and development expenses include internal and external costs. Internal costs include salaries and employment related expenses. External expenses consist of costs associated with product development. All such costs are charged to expense in the period they are incurred.Share-Based Compensation
For awards of nonvested stock to employees, share-based compensation is measured based on the fair value of the stock on the date of grant and the corresponding expense is recognized over the period during which an employee is required to provide service in exchange for the reward. Compensation expense related to service-based awards are recognized on a straight-line basis over the requisite service period for the entire award.
RiceBran Technologies
Notes to Consolidated Financial Statements
For restricted stock units issued to employees with market conditions, share-based compensation is measured based on the fair value of the award on the date of grant using a binomial simulation model and expense is recognized over the derived service period determined by the simulation. The binomial simulation model requires us to estimate key assumptions such as stock volatility, risk-free interest rates and dividend yields based on both historical information and management’s judgment regarding market factors and trends.
Share-based compensation for awards to nonemployees is calculated as of the grant date, taking into consideration the probability of satisfaction of performance conditions, in a manner consistent with awards to employees. The expense associated with share-based awards for service is recognized over the term of service. In the event services are terminated early or we require no specific future performance, the entire amount is expensed. The expense associated with share-based awards made in exchange for goods is generally attributed to expense in the same manner as if the vendor had been paid in cash.
Derivative Financial Instruments – In May 2020, we began, from time to time, to use derivative financial instruments to manage a portion of our risks related to commodity prices. We do not use derivative financial instruments for trading or speculative purposes. Changes in the fair value of derivative financial instruments are recognized either in cost of goods sold or in shareholders’ equity as a component of other comprehensive income (loss) (OCI), depending on whether the derivative financial instrument is undesignated or qualifies for hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Gains and losses on derivatives designated as cash flow hedges, to the extent they are included in the assessment of effectiveness, are recorded in OCI and subsequently reclassified to cost of goods sold to offset the impact of the hedged items when they occur. In the event it becomes probable the forecasted transaction to which a cash flow hedge relates will not occur, the derivative is terminated and the amount in accumulated OCI is recognized in earnings. All cash flows related to derivative financial instruments are classified as operating activities in our consolidated statements of cash flows. As of December 31, 2020, there are no derivative financial instruments outstanding.
Income Taxes
– We account for income taxes by recording a deferred tax asset or liability for the recognition of future deductible or taxable amounts and operating loss and tax credit carryforwards. Deferred tax expense or benefit is recognized as a result of timing differences between the recognition of assets and liabilities for financial reporting and tax purposes during the year.Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards. A valuation allowance is established, when necessary, to reduce that deferred tax asset if it is more likely than not that the related tax benefits will not be realized. The realization of deferred tax assets can be affected by, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the length of statutory carryforward periods, our experience with utilizing operating losses and tax credit carryforwards by jurisdiction, and tax planning alternatives that may be available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that may be different from current estimates of the tax liabilities. If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities may result in income tax benefits being recognized in the period when it is determined that the liabilities are no longer necessary.
We recognize interest and penalties related to uncertain tax positions, if any, in selling, general and administrative expenses.
Fair Value
– Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Certain assets and liabilities may be presented in the financial statements at fair value. Assets and liabilities measured at fair value on a non-recurring basis may include property and equipment.We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
● | Level 1 – inputs include quoted prices for identical instruments and are the most observable. |
● | Level 2 – inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and yield curves. |
● | Level 3 – inputs are not observable in the market and include management’s judgments about the assumptions market participants would use in pricing the asset or liability. |
RiceBran Technologies
Notes to Consolidated Financial Statements
NOTE 3.3. ACQUISITIONS
MGI
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) for an aggregate purchase price of $3.8 million. The purchase price included $0.3 million deposited in an escrow account at closing which was subsequently released to the sellers in June 2019. MGI owns and operates a grain mill and processing facility in East Grand Forks, Minnesota.
We acquired MGI as part of our strategy to expand our product portfolio. The acquisition has been accounted for as a business combination. The results of MGI’s operations are included in our consolidated financial statements beginning April 4, 2019. In 2019, we incurred $0.1 million of MGI acquisition-related costs which are included in selling, general and administrative expenses.The purchase price for MGI was subject to adjustment if the estimated closing working capital with respect to the assets purchased and the liabilities assumed was different than the actual closing working capital, as defined in the purchase agreement. The seller of MGI paid a working capital adjustment of $18 thousand in 2019.The following table summarizes as of December 31, 2019, the final purchase price allocation, the consideration transferred to acquire MGI and the amounts of identified assets acquired and liabilities assumed (in thousands).
Cash | $ | 3,795 | ||
Working capital adjustment to purchase price | (18 | ) | ||
Total fair value of consideration transferred | 3,777 | |||
Accounts receivable | 591 | |||
Inventories | 149 | |||
Deposits and other current assets | 12 | |||
Property and equipment | 1,560 | |||
Customer relationship | 930 | |||
Other finite-lived intangible assets | 35 | |||
Accounts payable | (219 | ) | ||
Finance lease liabilities | (18 | ) | ||
Net recognized amounts of identifiable assets acquired and liabilities assumed | 3,040 | |||
Goodwill | $ | 737 |
Estimated at June 30, 2019 | Adjustments | Final as of December 31, 2019 | ||||||||||
| Cash | $ | 3,795 | $ | - | $ | 3,795 | ||||||
| Working capital adjustment to purchase price | (38 | ) | 20 | (18 | ) | |||||||
| Total fair value of consideration transferred | 3,757 | 20 | 3,777 | |||||||||
| Accounts receivable | 591 | - | 591 | |||||||||
| Inventories | 149 | - | 149 | |||||||||
| Deposits and other current assets | 4 | 8 | 12 | |||||||||
| Property and equipment | 1,560 | - | 1,560 | |||||||||
| Customer relationship | 930 | - | 930 | |||||||||
| Other finite-lived intangible assets | 35 | - | 35 | |||||||||
| Accounts payable | (219 | ) | - | (219 | ) | |||||||
| Finance lease liabilities | (18 | ) | - | (18 | ) | |||||||
| Net recognized amounts of identifiable assets acquired and liabilities assumed | 3,032 | 8 | 3,040 | |||||||||
| Goodwill | $ | 725 | $ | 12 | $ | 737 | ||||||
The fair value of MGI’s trade receivables at acquisition, equaled the gross amount of trade receivables. The fair value of the customer relationship intangible at acquisition was estimated using an income approach based on expected future cash flows. As discussed in Note 9, we are amortizing the customer relationship intangible to expense over the 15-year period of expected future economic benefit, in proportion to the discounted expected future cash flows used to estimate the value of the intangible at acquisition. Goodwill primarily was attributed to intangible assets that do not qualify for separate recognition and synergies generated by MGI when combined with our existing operations. The $0.7 million allocated to goodwill is deductible for tax purposes over the next fifteen years.
Our revenues for 2020 and 2019 include $4.2 and $1.9 million related to the acquired MGI business. Our net loss for 2020 and 2019 includes $0.1 million of net income and $0.3 million of net loss from the acquired MGI business. TheThe following table provides unaudited pro forma information for the periodsyear ended December 31, 2019, presented as if the MGI acquisition had occurred January 1, 2018.2019.
2019 | ||||
Revenues (in thousands) | $ | 24,913 | ||
Loss from continuing operations (in thousands) | $ | (13,432 | ) | |
Loss per share - continuing operations | $ | (0.42 | ) | |
Weighted average number of common shares outstanding - basic and diluted | 32,359,316 | |||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| Revenues (in thousands) | $ | 224,913 | $ | 17,542 | ||||
| Loss from continuing operations (in thousands) | $ | (13,432 | ) | $ | (7,792 | ) | ||
| Loss per share - continuing operations | $ | (0.42 | ) | $ | (0.35 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 32,359,316 | 22,099,149 | ||||||
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, 2018,2019, or of our future operating results.
In November 2018, we acquired substantially all of the assets comprising the business of Golden Ridge Rice Mills, LLC, now conducting business as Golden Ridge Rice Mills, Inc. (Golden Ridge). The primary activity of the business is the operation of a rice mill in Wynne, Arkansas. We acquired the business as part of our strategy to vertically integrate in order to leverage our proprietary technologies for producing SRB and derivative products. The acquisition has been accounted for as a business combination. The results of Golden Ridge’s operations are included in our consolidated financial statements beginning November 28, 2018. In 2018, we incurred $0.1 million of Golden Ridge acquisition-related costs which are included in selling, general and administrative expenses.
Estimated at Acquisition and as of | Final as of | |||||||||||
December 31, 2018 | Adjustments | December 31, 2019 | ||||||||||
1,666,667 shares of common stock, at fair value of $3.00 per share at closing | $ | 5,000 | $ | - | $ | 5,000 | ||||||
Golden Ridge financial liabilities paid for the seller | 2,661 | - | 2,661 | |||||||||
Cash | 250 | - | 250 | |||||||||
Note payable to seller | 609 | - | 609 | |||||||||
Working capital adjustment to purchase price | (1,147 | ) | 584 | (563 | ) | |||||||
Total fair value of consideration transferred | 7,373 | 584 | 7,957 | |||||||||
Cash | 409 | (63 | ) | 346 | ||||||||
Accounts receivable | 1,587 | 87 | 1,674 | |||||||||
Inventories | 103 | - | 103 | |||||||||
Property and equipment | 5,092 | - | 5,092 | |||||||||
Accounts payable | (222 | ) | 110 | (112 | ) | |||||||
Commodities payable | (2,559 | ) | 432 | (2,127 | ) | |||||||
Accrued liabilities | (12 | ) | 12 | - | ||||||||
Lease liabilities | (104 | ) | - | (104 | ) | |||||||
Equipment notes payable | (99 | ) | 6 | (93 | ) | |||||||
Net recognized amounts of identifiable assets acquired and liabilities assumed | 4,195 | 584 | 4,779 | |||||||||
Goodwill | $ | 3,178 | $ | - | $ | 3,178 | ||||||
Estimated at Acquisition and as of December 31, 2018 | Adjustments | Final as of December 31, 2019 | ||||||||||
| 1,666,667 shares of common stock, at fair value of $3.00 per share at closing | $ | 5,000 | $ | - | $ | 5,000 | ||||||
| Golden Ridge financial liabilities paid for the seller | 2,661 | - | 2,661 | |||||||||
| Cash | 250 | - | 250 | |||||||||
| Note payable to seller | 609 | - | 609 | |||||||||
| Working capital adjustment to purchase price | (1,147 | ) | 584 | (563 | ) | |||||||
| Total fair value of consideration transferred | 7,373 | 584 | 7,957 | |||||||||
| Cash | 409 | (63 | ) | 346 | ||||||||
| Accounts receivable | 1,587 | 87 | 1,674 | |||||||||
| Inventories | 103 | - | 103 | |||||||||
| Property and equipment | 5,092 | - | 5,092 | |||||||||
| Accounts payable | (222 | ) | 110 | (112 | ) | |||||||
| Commodities payable | (2,559 | ) | 432 | (2,127 | ) | |||||||
| Accrued liabilities | (12 | ) | 12 | - | ||||||||
| Lease liabilities | (104 | ) | - | (104 | ) | |||||||
| Equipment notes payable | (99 | ) | 6 | (93 | ) | |||||||
| Net recognized amounts of identifiable assets acquired and liabilities assumed | 4,195 | 584 | 4,779 | |||||||||
| Goodwill | $ | 3,178 | $ | - | $ | 3,178 | ||||||
The 1,666,667 shares issued at closing of our purchase of Golden Ridge in 2018 included 380,952 shares that were deposited in an escrow account to be used to satisfy any indemnification obligations of the seller that may arise. As of December 31, 2018, the 380,952 shares remained in escrow. In July 2019, we reached an agreement to settle the $0.6 million working capital adjustment receivable and other claims with the sellers of Golden Ridge. As a result, in 2019 (i) 340,000 shares of common stock held in the escrow account ($1.0 million fair value as of both the settlement date and the November 28, 2018, acquisition date) were returned to us and retired, (ii) the remaining $0.4 million note payable we owed to a seller was cancelled and (iii) certain open grain purchase contracts with entities related to a seller were terminated. We recorded a gain on the noncash settlement of $0.8 million in the third quarter of 2019, which is included in other income. In connection with the foregoing, a settlement agreement was entered into among the parties, allparties. All shares of common stock were distributed and the escrow agreement was terminated.
In 2019, information was discovered requiring adjustments to the opening balance sheet of Golden Ridge. The adjustments resulted primarily from an overstatement of the opening balances of commodities payable and accounts payable at December 31, 2018. These balances were adjusted in the June 30, 2019 financial statements. The impact of the adjustments to our prior period financial statements is not considered significant. No additionalsubsequent adjustments have been made to the opening balances after June 30, 2019.balance sheet.
| Revenues (in thousands) | $ | 30,289 | ||
| Loss from continuing operations (in thousands) | $ | (10,601 | ) | |
| Loss per share - continuing operations | $ | (0.45 | ) | |
| Weighted average number of common shares outstanding - basic and diluted | 23,615,131 |
RiceBran Technologies
Notes to Consolidated Financial Statements
NOTE 4. DISCONTINUED OPERATIONS AND RESTRICTED CASH
In July 2017, we completed the sale of the assets of Healthy Natural (HN) for $18.3 million in cash and recognized a gain on sale of $8.2 million, net of $4.7 million in taxes. The selling price was subject to adjustment if the estimated closing working capital with respect to the assets sold and the liabilities assumed was different than the actual closing working capital for those assets and liabilities. The $8.2 million net gain on sale recognized in 2017 was based on an estimated working capital adjustment of $0.3 million, which was disputed. Our consolidated balance sheets included a liability for the settlement of the working capital adjustment of $0.3 million as of December 31, 2018. During the three months ended March 31, 2019, we finalized the adjustment with the purchaser of HN, and increased the estimated working capital adjustment from $0.3 million to $0.5 million. We paid the $0.5 million liability in July 2019. The adjustment to lower the gain on the sale of HN as a result of the change in the estimated working capital adjustment is recorded in discontinued operations in 2019, net of zero tax benefit.
NOTE 5.5. CASH AND CASH EQUIVALENTS
As of December 31, 2019,2020, we had $7.5$2.4 million of cash and cash equivalents invested in a money market fund with net assets invested in U.S. Dollar denominated money market securities of domestic and foreign issuers, U.S. Government securities and repurchase agreements. We consider all liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
We have cash on deposit in excess of federally insured limits at a bank. We do not believe that maintaining substantially all such assets with the bank or investing in a liquid mutual fund represent material risks.
NOTE 6. ACCOUNTS RECEIVABLE AND REVENUES
Amounts billed and due from our customers are classified as accounts receivables 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,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 revenue, 2020 | 10 | % | 11 | % | 3 | % | ||||||
% of revenue, 2019 | 11 | % | 16 | % | 2 | % | ||||||
% of accounts receivable, as of December 31, 2020 | 17 | % | 1 | % | 10 | % | ||||||
% of accounts receivable, as of December 31, 2019 | 10 | % | 31 | % | 10 | % | ||||||
| Customer | ||||||||||||||||||||
| A | B | C | D | E | ||||||||||||||||
| % of revenue, 2019 | 11 | % | 9 | % | 16 | % | 3 | % | 2 | % | ||||||||||
| % of revenue, 2018 | 17 | % | 14 | % | 1 | % | 4 | % | - | % | ||||||||||
| % of accounts receivable, as of December 31, 2019 | 10 | % | 8 | % | 31 | % | - | % | 10 | % | ||||||||||
| % of accounts receivable, as of December 31, 2018 | 13 | % | - | % | 16 | % | 14 | % | - | % | ||||||||||
The following table presents revenues by geographic area shipped to (in thousands).
2020 | 2019 | |||||||
United States | $ | 24,790 | $ | 22,533 | ||||
Other countries | 1,409 | 1,180 | ||||||
Revenues | $ | 26,199 | $ | 23,713 | ||||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| United States | $ | 22,533 | $ | 13,469 | ||||
| Other countries | 1,180 | 1,293 | ||||||
| Revenues | $ | 23,713 | $ | 14,762 | ||||
RiceBran Technologies
Notes to Consolidated Financial Statements
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).
2020 | 2019 | |||||||
Food | $ | 18,114 | $ | 16,957 | ||||
Animal nutrition | 8,085 | 6,756 | ||||||
Revenues | $ | 26,199 | $ | 23,713 | ||||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| Food | $ | 16,957 | $ | 8,600 | ||||
| Animal nutrition | 6,756 | 6,162 | ||||||
| Revenues | $ | 23,713 | $ | 14,762 | ||||
NOTE 7.7. INVENTORIES
The following table details the components of inventories (in thousands).
December 31 | ||||||||
2020 | 2019 | |||||||
Finished goods | $ | 1,512 | $ | 698 | ||||
Raw materials | 236 | 90 | ||||||
Packaging | 130 | 110 | ||||||
Inventories | $ | 1,878 | $ | 898 | ||||
| December 31 | ||||||||
| 2019 | 2018 | |||||||
| Finished goods | $ | 698 | $ | 853 | ||||
| Raw materials | 90 | 3 | ||||||
| Packaging | 110 | 102 | ||||||
| Inventories | $ | 898 | $ | 958 | ||||
NOTE 8.8. PROPERTY AND EQUIPMENT
The following table details the components of property and equipment (amounts in thousands).
December 31 | |||||||||||
2020 | 2019 | Estimated Useful Lives (Years) | |||||||||
Land | $ | 730 | $ | 730 | |||||||
Furniture and fixtures | 276 | 476 | 5 | - | 10 | ||||||
Plant | 9,377 | 9,667 | 20 | - | 40 years, or life of lease | ||||||
Computer and software | 1,060 | 1,317 | 3 | - | 5 | ||||||
Leasehold improvements | 1,880 | 2,019 | 4 | - | 15, or life of lease | ||||||
Machinery and equipment | 16,402 | 16,864 | 5 | - | 15 | ||||||
Property and equipment, cost | 29,725 | 31,073 | |||||||||
Less accumulated depreciation | 13,358 | 11,996 | |||||||||
Property and equipment, net | $ | 16,367 | $ | 19,077 | |||||||
| December 31 | |||||||||
| 2019 | 2018 | Estimated Useful Lives | |||||||
| Land | $ | 730 | $ | 585 | |||||
| Furniture and fixtures | 476 | 430 | 5-10 years | ||||||
| Plant | 9,667 | 8,613 | 20-40 years, or life of lease | ||||||
| Computer and software | 1,317 | 1,295 | 3-5 years | ||||||
| Leasehold improvements | 2,019 | 681 | 4-15 years, or life of lease | ||||||
| Machinery and equipment | 16,864 | 13,528 | 5-15 years | ||||||
| Property and equipment, cost | 31,073 | 25,132 | |||||||
| Less accumulated depreciation | 11,996 | 10,122 | |||||||
| Property and equipment, net | $ | 19,077 | $ | 15,010 | |||||
Amounts payable for property and equipment included in accounts payable totaled $0.3 million at December 31, 2020, and $0.1 million at December 31, 2019, and $0.2 million at December 31, 2018. During 2019, we financed the purchase of $0.3 million of property with finance leases and equipment notes.2019. Assets which had not yet been placed in service, included in property and equipment, totaled $0.6 million at December 31, 2020, and $1.5 million at December 31, 2019, and $2.2 million at December 31, 2018.2019.
NOTE 9.9. GOODWILL AND INTANGIBLES
A summary of goodwill activity
follows (in thousands).2020 | 2019 | |||||||
Goodwill, January 1 | $ | 3,915 | $ | 3,178 | ||||
MGI acquistion | - | 737 | ||||||
Goodwill, December 31 | $ | 3,915 | $ | 3,915 | ||||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| Goodwill, beginning of period | $ | 3,178 | $ | - | ||||
| Golden Ridge acquisition | - | 3,178 | ||||||
| MGI acquistion | 737 | - | ||||||
| Goodwill, end of period | $ | 3,915 | $ | 3,178 | ||||
RiceBran Technologies
Notes to Consolidated Financial Statements
Intangible assets, excluding goodwill, consist of the following (in thousands).
December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||
Estimated Useful Life | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||||||||||
Customer relationships | 15 | $ | 930 | $ | 236 | $ | 694 | $ | 930 | $ | 20 | $ | 910 | |||||||||||||||
Trademarks | 10 | 13 | 2 | 11 | 13 | 1 | 12 | |||||||||||||||||||||
Non-compete agreement | 5 | 22 | 8 | 14 | 22 | 3 | 19 | |||||||||||||||||||||
Other | 17 | 32 | 29 | 3 | 32 | 23 | 9 | |||||||||||||||||||||
Total intangible assets | $ | 997 | $ | 275 | $ | 722 | $ | 997 | $ | 47 | $ | 950 | ||||||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||
Estimated Useful Life | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||||||
| Customer relationships | 15 | $ | 930 | $ | 20 | $ | 910 | $ | - | $ | - | $ | - | |||||||||||||||
| Trademarks | 10 | 13 | 1 | 12 | - | - | - | |||||||||||||||||||||
| Non-compete agreement | 5 | 22 | 3 | 19 | - | - | - | |||||||||||||||||||||
| Other | 17 | 32 | 23 | 9 | 32 | 16 | 16 | |||||||||||||||||||||
| Total intangible assets | $ | 997 | $ | 47 | $ | 950 | $ | 32 | $ | 16 | $ | 16 | ||||||||||||||||
The customer relationship intangible, acquired from MGI in 2019, is amortizing over the 15-year period of expected future economic benefit, in proportion to the discounted expected future cash flows used to estimate the value of the intangible at acquisition. It is amortizing at a more rapid rate in the earlier periods than in later periods. Other finite-lived intangible assets are amortizing on a straight-line basis.
As of December 31, 2019,2020, the weighted-average remaining amortization period for intangibles other than goodwill is 13.612.7 years and future intangible amortization is expected to total the following (in thousands):
2021 | $ | 196 | ||
2022 | 146 | |||
2023 | 110 | |||
2024 | 80 | |||
2025 | 58 | |||
Thereafter | 132 | |||
Total amortization | $ | 722 |
| 2020 | $ | 228 | ||
| 2021 | 196 | |||
| 2022 | 146 | |||
| 2023 | 110 | |||
| 2024 | 80 | |||
| Thereafter | 190 | |||
| Total amortization | $ | 950 |
NOTE 10.10. LEASES
The components of lease expense and cash flows from leases for 2019 follows (in thousands). follow.
2020 | 2019 | |||||||
Finance lease cost: | ||||||||
Amortization of right-of use assets, included in cost of goods sold | $ | 62 | $ | 60 | ||||
Interest on lease liabilities | 14 | 14 | ||||||
Operating lease cost, included in selling, general and administrative expenses: | ||||||||
Fixed leases cost | 517 | 522 | ||||||
Variable lease cost | 127 | 132 | ||||||
Short-term lease cost | 9 | 21 | ||||||
Total lease cost | $ | 729 | $ | 749 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows from finance leases | $ | 14 | $ | 14 | ||||
Operating cash flows from operating leases | $ | 517 | $ | 522 | ||||
Financing cash flows from finance leases | $ | 101 | $ | 79 | ||||
| Finance lease cost: | ||||
| Amortization of right-of use assets, included in cost of goods sold | $ | 60 | ||
| Interest on lease liabilities | 14 | |||
| Operating lease cost, included in selling, general and administrative expenses: | ||||
| Fixed leases cost | 522 | |||
| Variable lease cost | 132 | |||
| Short-term lease cost, included in cost of goods sold | 21 | |||
| Total lease cost | $ | 749 | ||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from finance leases | $ | 14 | ||
| Operating cash flows from operating leases | $ | 522 | ||
| Financing cash flows from finance leases | $ | 79 | ||
As of December 31, 2019,2020, variable lease payments do not depend on a rate or index. As of December 31, 2019,2020, property and equipment, net, includes $0.3$0.2 million of finance lease right-of-use-assets, with an original cost of $0.4 million.
RiceBran Technologies
Notes to Consolidated Financial Statements
As of December 31, 2019,2020, 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 December 31, 2019,2020, follows.
Operating Leases | Finance Leases | |||||||||
Remaining leases terms (in years) | 2.8 | - | 12.2 | 0.1 | - | 3.5 | ||||
Weighted average remaining lease terms (in years) | 7.0 | 2.5 | ||||||||
Discount rates | 6.3% | - | 9.0% | 4.3% | - | 7.3% | ||||
Weighted average discount rate | 7.7% | 5.9% | ||||||||
Operating Leases | Finance Leases | |||||||
| Remaining lease terms (in years) | 0.3-13.2 | 1.1-4.5 | ||||||
| Weighted average remaining lease terms (in years) | 7.8 | 3.3 | ||||||
| Discount rates | 4.9%-9.0 | % | 4.3%-7.3 | % | ||||
| Weighted average discount rate | 7.6 | % | 5.8 | % | ||||
As of December 31, 2019,2020, operating leases have maturities extending through 2032. Maturities of lease liabilities as of December 31, 2019,2020, follows (in thousands).
Operating | Finance | |||||||
Leases | Leases | |||||||
2021 | $ | 536 | $ | 91 | ||||
2022 | 548 | 68 | ||||||
2023 | 528 | 38 | ||||||
2024 | 429 | 11 | ||||||
2025 | 439 | - | ||||||
Thereafter | 1,029 | - | ||||||
Total lease payments | 3,509 | 208 | ||||||
Amounts representing interest | (835 | ) | (13 | ) | ||||
Present value of lease obligations | $ | 2,674 | $ | 195 | ||||
Operating Leases | Finance Leases | |||||||
| 2020 | $ | 525 | $ | 115 | ||||
| 2021 | 536 | 91 | ||||||
| 2022 | 548 | 68 | ||||||
| 2023 | 528 | 38 | ||||||
| 2024 | 428 | 11 | ||||||
| Thereafter | 1,469 | - | ||||||
| Total lease payments | 4,034 | 323 | ||||||
| Amounts representing interest | (1,051 | ) | (32 | ) | ||||
| Present value of lease obligations | $ | 2,983 | $ | 291 | ||||
Note 11. Debt
In 2020 and 2019, we financed amounts owed for annual minimum operating lease payments and finance lease maturities asinsurance premiums under financing agreements. As of December 31, 2018, prepared2020, amounts due under insurance premium financing agreements are due in accordance with the guidance in effect priormonthly installments of principal and interest through March 2021, at interest rates of 4.7% to adoption of ASU 2016-02, follow (in thousands).
Operating Leases | Finance Leases | |||||||
| 2019 | $ | 519 | $ | 51 | ||||
| 2020 | 525 | 51 | ||||||
| 2021 | 536 | 33 | ||||||
| 2022 | 548 | 5 | ||||||
| 2023 | 528 | - | ||||||
| Thereafter | 1,897 | - | ||||||
| Total minimum lease payments | $ | 4,553 | 140 | |||||
| Amounts representing interest | (9 | ) | ||||||
| Present value of minimum payments | $ | 131 | ||||||
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 2019, we expensed $0.1 million of interest and fees under the agreement. In 2019, fees incurred averaged 6.7% (exclusive of deferred cost amortization) and interest averaged 8.2% of the amounts outstanding under the facility. In 2019, outstanding borrowings under the agreement averaged $0.2 million per day. As of December 31, 2019, the $1.8 million presented on our consolidated balance sheets as due under the factoring agreement consisted of $2.0 million borrowed net of $0.2 million of unamortized debt issuance costs. Amortization of debt issuance costs in 2019, 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 personal property assets.
Due under factoring agreement consists of the following (in thousands).
December 31, | ||||||||
2020 | 2019 | |||||||
Borrowings outstanding | $ | 1,860 | $ | 1,989 | ||||
Debt issuance costs, net | (75 | ) | (166 | ) | ||||
Due under factoring agreement | $ | 1,785 | $ | 1,823 | ||||
Additional information related to our factoring obligation follows.
2020 | 2019 | |||||||
Average borrowings outstanding (in thousands) | $ | 1,713 | $ | 272 | ||||
Amortization of debt issuance costs (in thousands) | $ | 91 | $ | 15 | ||||
Fees paid, as a percentage of average oustanding borrowings | 7.3 | % | 10.2 | % | ||||
Interest paid, as a percentage of average outstanding borrowings | 6.4 | % | 6.2 | % | ||||
RiceBran Technologies
Notes to Consolidated Financial Statements
Long-term debt consists of the following (in thousands).
December 31, | ||||||||
2020 | 2019 | |||||||
Payroll Protection Program note - Dated April 2020. Interest accrues at an annual rate of 1.0%. | ||||||||
Forgiven in January 2021. | $ | 1,792 | $ | - | ||||
Mortgage promissory note - Dated September 2020. Interest accrues at an annual rate which is the greater of 11.0% above the lender's prime rate and 14.3%. Payable in monthly installments through June 2022. | 1,817 | - | ||||||
Net of $25 debt issuance costs issuance costs at December 31, 2020 | ||||||||
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. | 37 | 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. | 33 | 39 | ||||||
Total long term debt, net | $ | 3,679 | $ | 101 | ||||
| December 31 | ||||||||
| 2019 | 2018 | |||||||
| 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%, 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. | $ | 62 | $ | 91 | ||||
| Equipment note - Dated December 2019. Due in monthly installments through December 2024. Interest accrues at the effective discount rate of 9.3%. | 39 | - | ||||||
| Total long term debt | $ | 101 | $ | 91 | ||||
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 were forgivable, if the loan proceeds were used for eligible purposes, including payroll, benefits, rent and utilities, and maintaining payroll levels. As of December 31 2020, payments could be deferred for up to two years. The loan proceeds were used for eligible purposes and the entire loan and related accrued interest was forgiven, in its entirety in January 2021.
In July 2020, we entered into a mortgage agreement with a lender pursuant to a promissory note. In September 2020, we borrowed $1.0 million on the note and, in October 2020, we borrowed the remaining $1.0 million available on the note. Interest on this note accrues at an annual rate which is the greater of 11.0% above the lender’s prime rate and 14.3%. In addition, we will incur a facility fee equal to 1.0% of the amount of each advance under the promissory note. The principal amount of the note must be repaid in monthly installments ending in June 2022. The note is secured by certain real property and personal property assets of Golden Ridge Rice Mills, Inc. As of December 31, 2021, the note bore interest at an annual rate of 14.3%.
Future principal maturities of long-term debt outstanding at December 31, 2019,2020, follow (in thousands).
2021 | $ | 597 | ||
2022 | 3,088 | |||
2023 | 9 | |||
2024 | 10 | |||
Principal maturities | 3,704 | |||
Debt issuance costs | (25 | ) | ||
Total long term debt, net | $ | 3,679 |
| 2020 | $ | 28 | ||
| 2021 | 31 | |||
| 2022 | 23 | |||
| 2023 | 9 | |||
| 2024 | 10 | |||
| $ | 101 |
We previously held a note payable to the seller of Golden Ridge, which bore interest at an annual rate of 6.8%. Interest was payable monthly. We paid $0.3 million of principal on the note in January 2019. The remaining principal of $0.4 million was payable upon maturity of the note in November 2019. The seller cancelled the note payable in July 2019 in partial settlement of the working capital adjustment receivable from the seller described further in Note 3.
During 2019, we borrowed under a demand loan collateralized by the investment in the money market fund described in Note 5, at amounts and rates determined at the discretion of the lender. Borrowing under the loan averaged $0.1 million in 2019 and interest averaged 5.5%. At December 31, 2019, the loan was paid in full, however the availability to borrow against these funds still exist.full.
NOTE 12.12. EQUITY, SHARE-BASED COMPENSATION, WARRANTSANDSECURITIES OFFERINGS
In June 2020, our shareholders approved, and we filed an amendment to our articles of incorporation, increasing our authorized shares of common stock from 50,000,000 to 150,000,000.
Our board of directors, without further action or vote by holders of our common stock, has the right to establish the terms, preference, rights and restrictions and issue shares of preferred stock. We previously designated and issued six series of preferred stock of which no shares remain outstanding. In addition, we designated and issued a seventh series of preferred stock, Series G, of which 225 shares remain outstanding as of December 31, 2019.
The Series G preferred stock is non-voting and may be converted into shares of our common stock at the holders’ election at any time, subject to certain beneficial ownership limitations, at a ratio of 1 preferred share for 948.9915 shares of common stock. The Series G preferred stock is entitled to receive dividends if we pay dividends on our common stock, in which case the holders of the preferred stock are entitled to receive the amount and form of dividends that they would have received if they held the common stock that is issuable upon conversion of the Series G preferred stock. If we are liquidated or dissolved, the holders of Series G preferred stock are entitled to receive, before any amounts are paid in respect of our common stock, an amount per share of preferred stock equal to $1,000, plus any accrued but unpaid dividends thereon.
Securities Offerings
On March 30, 2020, we entered into an at market issuance sales agreement with respect to an at-the-market offering program, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $6.0 million through B. Riley FBR, Inc, as sales agent. The issuances and sales of our common stock under the agreement are made pursuant to our effective “shelf” registration statement on Form S-3. During 2020, we issued and sold 4,850,489 shares of common stock under the agreement, at an average price of $0.53 per share. Proceeds from those sales are recorded in equity, net of $0.2 million of stock issuance costs.
In March 2019, we issued and sold 3,046,668 shares of common stock for $3.00 per share and a prefunded warrant (the 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 the holder 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. The holder exercised the entire Prefunded Warrant automatically when our shareholders approved the exercise in June 2019. We determined the Prefunded Warrant qualified for equity accounting. The net proceeds from the offering of $11.6 million, after deducting commissions and other cash offering expenses of $0.5 million, are recorded in equity. We determined the exercise price of the warrant was nominal and, as such, have considered the 1,003,344 shares underlying the warrant to be outstanding effective March 8, 2019, for the purposes of calculating basic EPS.
In December 2019, we issued and sold 6,875,0006,785,000 shares of common stock for $1.25 per share in a public offering. The net proceeds from the offering of $7.8 million, after deducting commissions and other cash offering expenses of $0.7 million, are recorded in equity.
The proceeds from the 2020 and 2019 securities offerings were used for general corporate purposes.
Equity Incentive Plan
Our board of directors adopted our 2014 Equity Incentive Plan (2014 Plan) in August 2014, after the plan was approved by shareholders. In June 2018, shareholders approved a 3,000,000 increase in the numberThe total shares of sharescommon stock authorized for issuance under the 2014 Plan increasing the total shares of common stock authorized under the 2014 Plan to 6,300,000.is 6,300,000 shares. Under the terms of the plan, we may grant stock options, shares of common stock and share-based awards to officers, directors, employees or consultants providing services on such terms as are determined by the board of directors. Our board of directors administers the plan, determines vesting schedules on plan awards and may accelerate the vesting schedules for award recipients. The stock options granted under the plan have terms of up to 10 years. As of December 31, 2019,2020, awards for the purchase of 4,236,7194,881,053 shares have been granted and remain outstanding (common stock options, common stock and restricted stock units) and 2,063,2811,418,947 shares are reserved for future grants under the 2014 Plan.
RiceBran Technologies
Notes to Consolidated Financial Statements
Share-based compensation expenses related to stock options, stock and restricted stock units issued to employees and directors are included in selling, general and administrative expenses. The following table provides a detailShare-based compensation by type of share-based compensation expenseaward follows (in thousands).
2020 | 2019 | |||||||
Common stock, vested and nonvested at issuance | $ | 308 | $ | 721 | ||||
Stock options | 148 | 354 | ||||||
Restricted stock units | 585 | 225 | ||||||
Compensation expense related to common stock awards issued under equity incentive plan | $ | 1,041 | $ | 1,300 | ||||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| Common stock, vested at issuance and nonvested at issuance | $ | 721 | $ | 555 | ||||
| Stock options | 354 | 132 | ||||||
| Restricted stock units | 225 | 103 | ||||||
Compensation expense related to common stock awards issued under equity incentive plan | $ | 1,300 | $ | 790 | ||||
Information regarding common stock issued under the equity incentive plan for the years endedfollows.
2020 | 2019 | |||||||||||||||||||||||
Shares Issued | Weighted Average Value Per Share | Weighted Average Vesting Period (Years) | Shares Issued | Weighted Average Value Per Share | Weighted Average Vesting Period (Years) | |||||||||||||||||||
Directors | 83,306 | $ | 0.53 | - | 219,401 | $ | 2.27 | 0.6 | ||||||||||||||||
Employees | 71,011 | 0.85 | - | 30,887 | 3.22 | - | ||||||||||||||||||
Consultants | 59,917 | 0.71 | - | 39,061 | 2.76 | 0.4 | ||||||||||||||||||
| 214,234 | 289,349 | |||||||||||||||||||||||
Nonvested Stock
As of December 31, 2019 and 2018, follows.
| 2019 | 2018 | |||||||||||||||||||||||
Shares Issued | Weighted Average Grant Date Fair Value Per Share | Weighted Average Vesting Period (Years) | Shares Issued | Weighted Average Grant Date Fair Value Per Share | Weighted Average Vesting Period (Years) | |||||||||||||||||||
| Twelve Months Ended December 31 | ||||||||||||||||||||||||
| Directors | 219,401 | $ | 2.27 | 0.6 | 220,046 | $ | 1.83 | 1.0 | ||||||||||||||||
| Employees | 30,887 | $ | 3.22 | - | 50,469 | $ | 1.38 | - | ||||||||||||||||
| Consultants | 39,061 | $ | 2.76 | 0.4 | 42,041 | $ | 1.90 | - | ||||||||||||||||
| 289,349 | 312,556 | |||||||||||||||||||||||
Shares Granted | Weighted Average Grant Date Fair Value Per Share | Fair Value | ||||||||||
| (1) | ||||||||||||
Nonvested at January 1, 2019 | 193,965 | $ | 1.84 | $ | 582 | |||||||
Granted | 150,274 | 2.88 | 432 | |||||||||
Vested | (227,711 | ) | 1.99 | 613 | ||||||||
Nonvested at December 31, 2019 (2) | 116,528 | $ | 2.88 | $ | 171 | |||||||
| 2019 | 2018 | |||||||||||||||||||||||||||||||
Shares Granted | Weighted Average Grant Date Fair Value Per Share | Fair Value | Unrecog- nized Stock Comp- ensation | Shares Granted | Weighted Average Grant Date Fair Value Per Share | Fair Value | Unrecog- nized Stock Comp- ensation | |||||||||||||||||||||||||
| (1) | (2) | (1) | (2) | |||||||||||||||||||||||||||||
| Nonvested at January 1 | 193,965 | $ | 1.84 | $ | 582 | $ | 173 | 384,744 | $ | 0.94 | $ | 569 | $ | 176 | ||||||||||||||||||
| Granted | 150,274 | 2.88 | 432 | 220,072 | 1.83 | 403 | ||||||||||||||||||||||||||
| Vested | (227,711 | ) | 1.99 | 613 | (410,851 | ) | 1.00 | 763 | ||||||||||||||||||||||||
| Nonvested at December 31 | 116,528 | $ | 2.88 | $ | 171 | $ | 160 | 193,965 | $ | 1.84 | $ | 582 | $ | 173 | ||||||||||||||||||
(1) | Represents pre-tax fair value, based on our closing stock prices, which would have been received by the holders of the stock had all such holders sold their underlying shares on the date indicated, the dates of grant or the dates of vesting, as applicable. |
(2) | The 116,528 nonvested shares of common stock outstanding at December 31, 2019, |
RiceBran Technologies
Notes to shares of common stock issued to a supplier in February 2016. Consolidated Financial Statements
We issued 950,000 nonvested shares of common stock to thata supplier in February 2016. The shares were being held in escrow until earned (as defined in our agreement) by the supplier at a fixed price of $2.80 per share. We recalled and retired the 830,124 shares remaining in escrow, after the related supply agreement terminated in August 2019. Cumulatively, a total of 119,896 shares were released from escrow. During 2019, we released from escrow and expensed the value of 20,640 shares of common stock earned by the supplier, at $2.92 per share. The $2.92 per share wasActivity in these shares is not reflected in the fair value of the shares on January 1, 2019, the date we adopted ASU 2018-07. During 2018, we released from escrow and expensed the value of 39,934 shares ofnonvested common stock earned by the supplier, at an average of $2.41 per share. The shares released from escrow in 2018 were valued at the fair value of the shares when earned, under the guidance for nonemployee awards in effect in 2018, prior to our adoption of ASU 2018-07.
Options
Stock option activity for the years ended December 31, 2019 and 2018, follows.
2020 | 2019 | |||||||||||||||||||||||||||||||
Shares Under Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life (Years) | Shares Under Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||||||||||||||
Outstanding at January 1 | 996,009 | $ | 3.23 | 8.1 | 950,727 | $ | 3.06 | 8.5 | ||||||||||||||||||||||||
Granted (1) | 653,004 | 1.22 | $ | 0.73 | 10.0 | 385,883 | 3.01 | $ | 1.83 | 10.0 | ||||||||||||||||||||||
Cash exercised (2) | - | NA | NA | (165,812 | ) | 0.94 | 8.1 | |||||||||||||||||||||||||
Forfeited | (973,987 | ) | 2.56 | 8.1 | (174,789 | ) | 3.98 | 8.4 | ||||||||||||||||||||||||
Outstanding at December 31 | 675,026 | $ | 2.24 | 7.9 | 996,009 | $ | 3.23 | 8.1 | ||||||||||||||||||||||||
| 2019 | 2018 | |||||||||||||||||||||||||||||||
Shares Under Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life (Years) | Shares Under Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||||||||||||||
| Outstanding at January 1 | 950,727 | $ | 3.06 | 8.5 | 639,659 | $ | 2.91 | 8.5 | ||||||||||||||||||||||||
| Granted (1) | 385,883 | 3.01 | $ | 1.83 | 10.0 | 653,873 | 2.25 | $ | 1.50 | 10.0 | ||||||||||||||||||||||
| Cash exercised (2) | (165,812 | ) | 0.94 | 8.1 | (32,500 | ) | 0.85 | 8.6 | ||||||||||||||||||||||||
| Forfeited | (174,789 | ) | 3.98 | 8.4 | (310,305 | ) | 1.28 | 8.5 | ||||||||||||||||||||||||
| Outstanding at December 31 | 996,009 | $ | 3.23 | 8.1 | 950,727 | $ | 3.06 | 8.5 | ||||||||||||||||||||||||
(1) | The options granted vest and become exercisable in annual or monthly installments ending three or four years from the date of grant. |
(2) | In 2019, includes options for 31,955 shares of common stock at a weighted average exercise price of $1.16 per share for which we accelerated vesting upon termination of employment for an employee in June 2019. We expensed $0.1 million of incremental expense upon acceleration of vesting. |
Information related to outstanding and exercisable stock options as of December 31, 2019,2020, follows.
Outstanding | Exercisable | |||||||||||||||||||||||
Range of Exercise Prices | Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||||
less than $1.00 | 78,000 | $ | 0.85 | 6.3 | 68,500 | $ | 0.85 | 6.3 | ||||||||||||||||
$1.00 to $1.99 | 348,119 | 1.26 | 8.7 | 33,782 | 1.48 | 6.7 | ||||||||||||||||||
$2.00 to $2.99 | 126,750 | 2.77 | 8.3 | 47,687 | 2.82 | 7.9 | ||||||||||||||||||
$3.00 to $3.99 | 92,634 | 3.34 | 7.3 | 46,509 | 3.37 | 6.3 | ||||||||||||||||||
$4.00 to $4.99 | 23,104 | 4.43 | 3.7 | 23,094 | 4.43 | 3.7 | ||||||||||||||||||
$5.00 to $74.00 | 6,419 | 38.59 | 1.0 | 6,419 | 38.59 | 1.0 | ||||||||||||||||||
| 675,026 | $ | 2.24 | 7.9 | 225,991 | $ | 3.37 | 6.3 | |||||||||||||||||
| Outstanding | Exercisable | ||||||||||||||||||||||||
Range of Exercise Prices | Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Shares Underlying Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |||||||||||||||||||
| $0.85 | 115,500 | $ | 0.85 | 7.3 | 52,750 | $ | 0.85 | 7.3 | |||||||||||||||||
| $1.09 to $1.98 | 146,431 | 1.39 | 7.9 | 38,513 | 1.40 | 7.6 | |||||||||||||||||||
| $2.53 to $2.97 | 458,750 | 2.80 | 9.0 | 78,500 | 2.87 | 8.4 | |||||||||||||||||||
| $3.19 to $3.52 | 199,817 | 3.30 | 8.8 | 20,631 | 3.47 | 5.5 | |||||||||||||||||||
| $4.27 to $4.77 | 38,105 | 4.57 | 4.6 | 38,071 | 4.57 | 4.6 | |||||||||||||||||||
| $16.00 to $74.00 | 37,406 | 21.37 | 1.7 | 37,406 | 21.37 | 1.7 | |||||||||||||||||||
| 996,009 | $ | 3.23 | 8.1 | 265,871 | $ | 5.15 | 6.4 | ||||||||||||||||||
As of December 31, 2019,2020, outstanding stock options had an intrinsic value of $0.1 million,zero, the weighted average remaining vesting period of options outstanding was 3.02.6 years and unrecognized option compensation cost was $1.0$0.4 million. As of December 31, 2019,2020, exercisable options had an intrinsic value of less than $0.1 million.zero. The intrinsic value of options exercised was $0.4 million in 2019 and $0.1 million in 2018.2019. The following are the assumptions used in valuing the 2019 and 2018 stock option grants:
2020 | 2019 | |||||||||
Assumed volatility | 60% | - | 69% | 64% | - | 69% | ||||
(62% weighted average) | (67% weighted average) | |||||||||
Assumed risk free interest rate | 1.3% | - | 1.7% | 1.8% | - | 2.7% | ||||
(1.6% weighted average) | (2.4% weighted average) | |||||||||
Average expected life of options (in years) | 5.9 | - | 7.0 | 6.1 | - | 6.3 | ||||
(6.3 weighted average) | (6.2 weighted average) | |||||||||
Expected dividends | - | - | ||||||||
| Year Ended December 31 | ||||||
| 2019 | 2018 | |||||
| Assumed volatility | 64% - 69% | 75% - 81% | ||||
| (67% weighted average) | (78% weighted average) | |||||
| Assumed risk free interest rate | 1.8% - 2.7% | 2.2% - 2.8% | ||||
| (2.4% weighted average) | (2.5% weighted average) | |||||
| Average expected life of options (in years) | 6.1 - 6.3 | 6.2 | ||||
| (6.2 weighted average) | (6.2 weighted average) | |||||
| Expected dividends | - | - | ||||
RiceBran Technologies
Notes to employees for the purchase of up to 591,004 shares of common stock, at an exercise price of $1.23 per share which vest and become exercisable in four annual installments ending in January 2024. The options have a grant date fair value per share of $1.26.
Restricted Stock Units
Restricted stock unit (RSU) activity for the years ended December 31, 2019with employees and 2018,directors follows.
2020 | 2019 | |||||||||||||||||||||||
RSU Shares Issued | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | RSU Shares Issued | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | |||||||||||||||||||
Nonvested at January 1 | 1,148,062 | $ | 377 | 1. 4 | 1,215,000 | $ | 683 | 2.3 | ||||||||||||||||
Granted (1) | 1,261,803 | 828 | 0.9 | 213,062 | 145 | 2.4 | ||||||||||||||||||
Modified | - | - | - | - | ||||||||||||||||||||
Before modification (2) | (227,062 | ) | (22 | ) | - | - | ||||||||||||||||||
After modification (3) | 620,000 | 353 | 2.0 | - | - | |||||||||||||||||||
Vested (4) | (386,403 | ) | - | - | - | |||||||||||||||||||
Cancelled | (625,000 | ) | - | - | - | |||||||||||||||||||
Forfeited (5) | (296,000 | ) | (221 | ) | (280,000 | ) | (226 | ) | ||||||||||||||||
Expensed | - | (585 | ) | - | (225 | ) | ||||||||||||||||||
Nonvested at December 31 | 1,495,400 | $ | 730 | 1.4 | 1,148,062 | $ | 377 | 1.4 | ||||||||||||||||
(1) | The shares of common stock subject to the RSUs granted in 2020 were vested when granted or vest within two years of grant. The 2020 RSU grants were not subject to any market conditions and were valued using the market price of our common stock on the date of grant. Prior to being modified in 2020, the shares of common stock subject to the RSUs granted in 2019 vested 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 in certain grants, and expired on the fifth anniversary of each grant. The assumptions used in valuing the 2019 RSU grants, which contained market conditions, follow: |
2019 | |||||
Assumed volatility | 4.3% | - | 44% | ||
(44% weighted average) | |||||
Assumed risk free interest rate | 1.4% | - | 2.3% | ||
(1.8% weighted average) | |||||
Expected dividends | - | ||||
| 2019 | 2018 | |||||||||||||||||||||||
RSU Shares Issued to Employees | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | RSU Shares Issued to Employees | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | |||||||||||||||||||
| Nonvested at January 1 | 1,215,000 | $ | 683 | 2.3 | 1,175,000 | $ | 161 | 3.0 | ||||||||||||||||
| Granted | 213,062 | 145 | 2.4 | 1,045,000 | 724 | 2.2 | ||||||||||||||||||
| Cancelled | - | - | (705,000 | ) | (31 | ) | ||||||||||||||||||
| Forfeited | (280,000 | ) | (227 | ) | (300,000 | ) | (69 | ) | ||||||||||||||||
| Expensed | - | (224 | ) | - | (102 | ) | ||||||||||||||||||
| Nonvested at December 31 | 1,148,062 | $ | 377 | 1.4 | 1,215,000 | $ | 683 | 2.3 | ||||||||||||||||
(2) | In December 2020, we modified RSUs for a total of 227,062 shares of common stock. Prior to modification, the shares subject to the RSUs vested 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 vested as to (i) 22,706 shares on the date the vesting price equals or exceeds $5.00 per share, (ii) 68,119 shares on the date the vesting price equals or exceeds $10.00 per share and (iii) 136,237 shares on the date the vesting price equals or exceeds $15.00 per share. Vesting on the RSU shares would have occurred 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 from October 2023 to August 2024. |
(3) | In December 2020, after modification, shares subject to the modified RSUs referred to above totaled 620,000 and vest as to 50% of the shares in December 2021 and as to the remainder of the shares in December 2022. We are recognizing the total of (i) the remaining unrecognized compensation on the awards as of the modification date and (ii) the increase in fair value of the RSUs as a result of the modification, over the remaining two-year vesting period of the RSUs. |
(4) | Represents shares of common stock subject to RSUs which were vested when granted. |
(5) | In 2020 and 2019, we reversed expense recognized in prior periods on forfeited RSU shares in the amounts indicated in the unrecognized stock compensation column. |
As of December 31, 2019, we have outstanding RSUs covering a total2020, issuance of 1,148,062836,803 shares of our common stock. The sharesstock subject to thecertain RSUs, vest based upon a vesting price equal386,403 of which are vested, is deferred to the volume weighted average trading price of our common stock over sixty-five consecutive trading days. Subject to a minimum service period in certain grants, as described in the next sentence, the RSU shares vest as to (i) 114,806 shares on the date the vesting price equals or exceeds $5.00 per share (ii) 344,419 shares the date the vesting price equals or exceeds $10.00 per share and (iii) 688,837 shares the date the vesting price equals or exceeds $15.00 per share. In certain RSUs, vesting 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.
RiceBran Technologies
Notes to Consolidated Financial Statements
| Year Ended December 31 | ||||||
| 2019 | 2018 | |||||
| Assumed volatility | 43% - 44% | 45.0% | ||||
| (44% weighted average) | ||||||
| Assumed risk free interest rate | 1.4% - 2.3% | 2.9% - 3.0% | ||||
| (1.8% weighted average) | (3.0% weighted average) | |||||
| Expected dividends | - | - | ||||
Warrants
Warrant activity, excluding activity related to the Prefunded Warrant, for the years ended December 31, 2020 and 2019, and 2018, follows.
2020 | 2019 | |||||||||||||||||||||||
Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |||||||||||||||||||
Outstanding at January 1 | 7,532,280 | $ | 1.32 | 1.9 | 10,252,714 | $ | 2.25 | 2.3 | ||||||||||||||||
Cash exercised | (12,948 | ) | 0.96 | - | (685,409 | ) | 3.01 | 0.3 | ||||||||||||||||
Cashless exercised (1) | (215,740 | ) | 0.96 | - | - | NA | NA | |||||||||||||||||
Expired | (657,676 | ) | 5.25 | - | (2,035,025 | ) | 5.25 | - | ||||||||||||||||
Outstanding at December 31 (2) | 6,645,916 | $ | 0.98 | 1.1 | 7,532,280 | $ | 1.32 | 1.9 | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||||||||||
Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |||||||||||||||||||
| Outstanding at January 1 | 10,252,714 | $ | 2.25 | 2.3 | 21,157,273 | $ | 2.30 | 3.4 | ||||||||||||||||
| Issued (1) | - | NA | NA | 315,000 | 4.73 | NA | ||||||||||||||||||
| Cash exercised | (685,409 | ) | 3.01 | 0.3 | (8,686,838 | ) | 1.28 | 3.6 | ||||||||||||||||
| Cashless exercised (2) | - | NA | NA | (300,000 | ) | 1.60 | 1.8 | |||||||||||||||||
| Impact of modification (3): | ||||||||||||||||||||||||
| After modification | - | NA | NA | 600,000 | 3.30 | 0.6 | ||||||||||||||||||
| Prior to modification | - | NA | NA | (850,000 | ) | 5.27 | 1.6 | |||||||||||||||||
| Expired | (2,035,025 | ) | 5.25 | - | (1,982,721 | ) | 6.61 | NA | ||||||||||||||||
| Outstanding at December 31 | 7,532,280 | $ | 1.32 | 1.9 | 10,252,714 | $ | 2.25 | 2.3 | ||||||||||||||||
(1) |
We issued |
(2) | Under the terms of certain outstanding warrants, |
As of December 31, 2019,2020, all outstanding warrants were exercisable. The following table summarizes information related to exercisable and outstanding warrants as of December 31, 2019.2020.
Range of Exercise Prices | Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |||||||||||
| $ | 0.96 | 6,570,916 | $ | 0.96 | 1.1 | |||||||||
| $ | 2.00 | 50,000 | 2.00 | 2.1 | ||||||||||
| $ | 5.25 | 25,000 | 5.25 | 0.1 | ||||||||||
| 6,645,916 | $ | 0.98 | 1.1 | |||||||||||
Range of Exercise Prices | Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| $0.96 | 6,680,585 | $ | 0.96 | 2.1 | |||||||||
| $2.00 | 50,000 | 2.00 | 3.1 | ||||||||||
| $5.25 to $5.87 | 621,695 | 5.26 | 0.2 | ||||||||||
| 7,352,280 | $ | 1.32 | 1.9 | ||||||||||
Note 13. INVOLUNTARY CONVERSION OF ASSETS
In 2020, we wrote down assets, consisting primarily of a building, machinery and equipment, in the amount of $0.9 million and incurred other costs of $0.1 million as a result of hurricane damage that occurred in August 2020. This event damaged our Lake Charles, Louisiana property, and operations at that facility were shut down in September 2020. We expect insurance recoveries will cover our asset loss to the extent it exceeds our $0.1 million deductible under our insurance policy. In September 2020, we received an advance on the insurance settlement of $0.3 million and we accrued a receivable for the additional $0.7 million of expected insurance proceeds related to our asset loss. The resulting $0.1 million net loss on involuntary conversion of assets is included in selling, general and administrative expenses in our consolidated financial statements. The insurance proceeds receivable is included in other current assets on our consolidated balance sheets. The final settlement with the insurer on this matter will likely differ from the total proceeds we estimated as of December 31, 2020. We accrue estimated insurance proceeds receivable when the proceeds are estimable and probable of collection. Given the nature of recoveries of lost profits under business interruption insurance we have not accrued insurance proceeds receivable for any potential recoveries of lost profits under our insurance policy.
RiceBran Technologies
Notes to Consolidated Financial Statements
NOTE 13. INCOME TAXESNote 1
Deferred tax asset (liability) is comprised of the following (in thousands):
December 31 | ||||||||
2020 | 2019 | |||||||
Net operating loss carryforwards | $ | 11,473 | $ | 7,672 | ||||
Stock options and warrants | 576 | 420 | ||||||
Property | 50 | 138 | ||||||
Intangible assets | (9 | ) | 66 | |||||
Capitalized expenses | 85 | 54 | ||||||
Other | 135 | 210 | ||||||
Operating right-of-use lease assets | (652 | ) | (667 | ) | ||||
Operating right-of-use lease liabilities | 763 | 794 | ||||||
Net deferred tax assets | 12,421 | 8,687 | ||||||
Less: Valuation allowance | (12,421 | ) | (8,687 | ) | ||||
Deferred tax asset (liability) | $ | - | $ | - | ||||
| December 31 | ||||||||
| 2019 | 2018 | |||||||
| Net operating loss carryforwards | $ | 7,672 | $ | 4,541 | ||||
| Stock options and warrants | 420 | 214 | ||||||
| Property | 138 | 299 | ||||||
| Intangible assets | 66 | 94 | ||||||
| Capitalized expenses | 54 | 86 | ||||||
| Other | 210 | 164 | ||||||
| Operating right-of-use lease assets | (667 | ) | ||||||
| Operating right-of-use lease liabilities | 794 | |||||||
| Net deferred tax assets | 8,687 | 5,398 | ||||||
| Less: Valuation allowance | (8,687 | ) | (5,398 | ) | ||||
| Deferred tax asset (liability) | $ | - | $ | - | ||||
We have determined it is more likely than not that our deferred tax assets will not be realized. Accordingly, we have provided a valuation allowance for deferred tax assets.
The following table summarizes the change in the valuation allowance (in thousands):
2020 | 2019 | |||||||
Vaulation allowances, beginning of year | $ | 8,687 | $ | 5,398 | ||||
Net operating loss | 3,039 | 3,284 | ||||||
Expiration of net operating losses and limitations | (20 | ) | (7 | ) | ||||
Adjustment to deferred taxes | (51 | ) | 29 | |||||
Impact of state tax rate change | 746 | 26 | ||||||
Other adjusments | 20 | (43 | ) | |||||
Valuation allowance, end of year | $ | 12,421 | $ | 8,687 | ||||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| Vaulation allowances, beginning of year | $ | 5,398 | $ | 13,872 | ||||
| Net operating loss | 3,284 | 1,920 | ||||||
| Expiration of net operating losses and limitations | (7 | ) | (9,939 | ) | ||||
| Adjustment to deferred taxes | 29 | (321 | ) | |||||
| Impact of state tax rate change | 26 | (146 | ) | |||||
| Other adjusments | (43 | ) | 12 | |||||
| Valuation allowance, end of year | $ | 8,687 | $ | 5,398 | ||||
As of December 31, 2019,2020, net operating loss (NOL) carryforwards for U.S. federal tax purposes totaled $31.4$43.2 million. Effective with the 2017 Tax Act in December 2017, NOLs generated after December 31, 2017, do not expire. Federal NOLs of $9.9 million expire at various dates from 20202021 through 2037 and federal NOLs of $21.5$33.2 million do not expire. NOL carryforwards for state tax purposes totaled $40.6$51.6 million at December 31, 20192020 and expire at various dates from 20202021 through 2039.
Our ability to utilize previously accumulated NOL carryforwards is subject to substantial annual limitations due to the changechanges in ownership provisions of the Internal Revenue Code (IRC) of 1986, as amended, and similar state regulations. Prior to 2019, we experienced several ownership changes as defined in IRC Section 382(g). In general, the annual limitation is equal to the value of theour stock of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurs.occurred. Any unused annual limitation may generally be carried over to later years until the NOL carryforwards expire. We completed a formal analysis for the taxable year 2017 to determine the amount of annual limitation on net operations loss carryforwards prior to utilization. The study resulted in a substantial annual limitation on the utilization of net operating loss carryforwards generated before September 13, 2017. Accordingly, we have reduced our net operating loss carryforwardsNOL by $13.7$24.9 million in the table above to reflect these limitations. On November 28, 2017, Nutra S.A. LLC (Nutra SA) redeemed our entire membership interest in Nutra SA which resulted in generating a capital loss of $29.6 million for federal tax purposes. Of this, $23.6 million is subject to an IRC Section 382 annual limitation of $0.3 million. We have determined it is more likely than not that all of the capital loss subject to the IRC Section 382 limitation will expire unused. Accordingly, we have not recognized the deferred tax asset associated with the IRC Section 382 limited capital loss.
We are subject to taxation in the U.S. federal jurisdiction and various state and local jurisdictions. We record liabilities for income tax contingencies based on our best estimate of the underlying exposures. We are open for audit by the IRS for years after 20152016 and, generally, by U.S. state tax jurisdictions after 2014.2015.
RiceBran Technologies
Notes to Consolidated Financial Statements
Reconciliations between the amounts computed by applying the U.S. federal statutory tax rate to loss before income taxes, and income tax expense (benefit) follows (in thousands):
2020 | 2019 | |||||||
Income tax benefit at federal statutory rate | $ | (2,459 | ) | $ | (2,928 | ) | ||
Increase (decrease) resulting from: | ||||||||
State tax benefit, net of federal tax effect | (623 | ) | (437 | ) | ||||
Effect of change in state tax rate | (746 | ) | (26 | ) | ||||
Change in valuation allowance | 3,734 | 3,341 | ||||||
Expirations of net operating losses and application of IRC 382 limitation | 20 | 7 | ||||||
Adjustments to deferreds | 51 | (29 | ) | |||||
Other | 42 | 72 | ||||||
Income tax expense | $ | 19 | $ | - | ||||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| Income tax benefit at federal statutory rate | $ | (2,928 | ) | $ | (1,692 | ) | ||
| Increase (decrease) resulting from: | ||||||||
| State tax benefit, net of federal tax effect | (437 | ) | (184 | ) | ||||
| Effect of change in state tax rate | (26 | ) | 146 | |||||
| Change in valuation allowance | 3,341 | (8,474 | ) | |||||
| Expirations of net operating losses and application of IRC 382 limitation | 7 | 9,939 | ||||||
| Adjustments to deferreds | (29 | ) | 321 | |||||
| Other | 72 | (11 | ) | |||||
| Income tax expense | $ | - | $ | 45 | ||||
Based on an analysis of tax positions taken on income tax returns filed, we determined no material liabilities related to uncertain income tax positions existed as of December 31, 20192020 or 2018, based on our analysis of tax positions taken on income tax returns filed.2019. Although we believe the amounts reflected in our tax returns substantially comply with applicable U.S. federal, state and foreignlocal 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 Payroll Protection Program (PPP) loans, 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. The Consolidated Appropriations Act (CAA), 2021, enacted into U.S. law on December 27, 2020, provides clarity on the tax treatment of CARES PPP loans and refundable payroll tax credits under CARES, among other things. Some of the CAA provisions are expected to be effective retroactively for years prior to 2020. Except for the impact of the PPP loan we received under CARES, see Note 11, we do not anticipate CARES or CAA will have a material impact on our financial position, results of operations or cash flows.
NOTE 14.Note 15. INCOME (LOSS) PER SHARE(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 stocksstock 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, and information on potentially dilutive securities.computations.
2020 | 2019 | |||||||
NUMERATOR (in thousands): | ||||||||
Basic and diluted - loss from continuing operations | $ | (11,730 | ) | $ | (13,735 | ) | ||
DENOMINATOR: | ||||||||
Weighted average number of shares of shares of common stock outstanding | 41,019,802 | 32,359,316 | ||||||
Weighted average number of shares of common stock underlying vested restricted stock units | 111,980 | - | ||||||
Basic EPS - weighted average number of shares outstanding | 41,131,782 | 32,359,316 | ||||||
Effect of dilutive securities outstanding | - | - | ||||||
Diluted EPS - weighted average number of shares outstanding | 41,131,782 | 32,359,316 | ||||||
| Year Ended December 31 | ||||||||
| 2019 | 2018 | |||||||
| NUMERATOR: Basic and diluted - loss from continuing operations (in thousands) | $ | (13,735 | ) | $ | (8,101 | ) | ||
| DENOMINATOR: Basic and diluted - weighted average number of common shares outstanding (in thousands) | 32,359,316 | 22,099,149 | ||||||
Number of shares of common stock which could be purchased with weighted average outstanding securities not included in diluted EPS because effect would be antidilutive: | ||||||||
| Stock options | 1,024,811 | 911,264 | ||||||
| Warrants | 8,443,547 | 16,383,944 | ||||||
| Convertible preferred stock | 224,848 | 581,680 | ||||||
| Restricted stock units | 1,235,287 | 623,603 | ||||||
Weighted average number of nonvested shares of common stock not included in diluted EPS because effect would be antidilutive | 659,581 | 1,169,986 | ||||||
RiceBran Technologies
Notes to Consolidated Financial Statements
No effects of potentially dilutive securities outstanding at December 31, 2019 and 2018, were not included in the calculation of diluted EPS infor 2020 and 2019, and 2018 because to do so would be anti-dilutive.anti-dilutive as a result of our loss from continuing operations. Potentially dilutive securities outstanding during 2020 and 2019 included our outstanding convertible preferred stock, options, warrants, nonvested restricted stock units and nonvested stock. Those potentially dilutive securities, listedfurther described in the table above which were anti-dilutive in 2019 and 2018, which remain outstanding,Note 12, could potentially dilute EPS in the future.
NOTE 15. FAIR VALUE MEASUREMENTNote
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). There were no derivative financial instruments outstanding at December 31, 2020 or 2019. The fair value of cash and cash equivalents, restricted cash, accounts and other receivables, and accounts payable, approximatescommodities payable and short-term debt approximated their carrying value due to shorter maturities. As of December 31, 2019,2020, the fair value of our operating lease liabilities was approximately $0.2 million higher than their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements). As of December 31, 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). As of December 31, 2019, the fair value of our operating leases liabilities was approximated $0.3 million higher than the carrying value of our operating lease liabilities, based on current market rates for similar leases with similar maturities (Level 3 measurement).
NOTE 16. COMMITMENTS AND CONTINGENCIESNote
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 and other proceedings had or are expected to have a material effect on our financial position or results of operations. Defense costs are expensed as incurredoperations in 2020 and are included2019, except for a contract dispute settled in professional fees.2020. During 2020, we recognized $0.8 million in cost of goods sold related to the resolution of that contract dispute.
NOTE 17. RELATED PARTY TRANSACTIONSNote
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 26.6%25.4% of our outstanding common stock. We have agreedagreed 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 the Prefunded Warrant, in the transaction further described in Note 12. In December 2019, CGC participated in our public offering, also further discussed in Note 12, and purchased 3,200,000a prefunded warrant exercisable into 1,003,344 shares of common stock atfor $2.99 per share, in a purchaseprivate placement. The prefunded warrant had an exercise price of $1.25$0.01 per share.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 18.19. TRANSACTIONS WITH EMPLOYEES
During the three months ended March 31, 2019, we paid $1.4 million to entities owned by our former employee, and former owner of Golden Ridge, owns various farms and a freight company with which we conducted business. During 2019, we paid $1.7 million to these entities.Wayne Wilkison. As of December 31, 2020 and 2019, there were no amounts were owed to these entities.
NOTE 20. FAILURE TO COMPLY WITH NASDAQ LISTING REQUIREMENTS
On July 27, 2020, we received a notification letter from The note payableNasdaq Stock Market LLC (Nasdaq) indicating that we have failed to sellercomply with the minimum bid price requirement of Golden Ridge, described further in Note 3,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 discretion, of at least 10, but not to exceed 20, consecutive business days. We requested and obtained an extension of time to regain compliance with the minimum bid price requirement which was payable to Wayne Wilkison. The purchase price working capital adjustment, described further in Note 3 was receivableend July 26, 2021. Subsequently, on February 17, 2021, we received a letter from Mr. Wilkison.
PART II
(continued)
ITEMItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREChanges in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as such term is defined in Rule 13a and Rule15d-15(e)) under the Exchange Act was performed as of December 31, 2019,2020, under the supervision and with the participation of our current management, including our current Chief Executive Officer,Chairman, Chief Financial Officer, and Chief Accounting Officer. Our disclosure controls and procedures have been designed to ensure that information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive OfficerChairman and Chief Financial Officer to allow timely decisions regarding required disclosures.
Based on this evaluation, our Chief Executive OfficerChairman and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2019.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarteryear ended December 31, 20192020, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Management Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (Exchange Act) and for the assessment of the effectiveness of internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
(ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
(iii) | provide reasonable assurance regarding prevention, or timely detection, of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of current management, including our current Chief Executive Officer,Chairman, Chief Financial Officer, and Chief Accounting Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2019.2020. In making this assessment, management used the criteria set forth in the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled “Internal Control - Integrated Framework (the 2013 Framework).” Based on this analysis, our management concluded that as of December 31, 2019,2020, our internal control over financial reporting was effective based upon the criteria set forth by the 2013 Framework.
ITEMItem 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEDirectors, Executive Officers and Corporate Governance
The information required by Item 10 of Part III is incorporated by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.
The information required by Item 11 of Part III is incorporated by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.
ITEMItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 12 of Part III is incorporated by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.
ITEMItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCECertain Relationships and Related Transactions, and Director Independence
The information required by Item 13 of Part III is incorporated by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.
The information required by Item 14 of Part III is incorporated by reference to our definitive proxy statement, to be filed within 120 days of our fiscal year end, or will be included in an amendment to this Form 10-K.
See Exhibit Index attached hereto.
The Financial Statements are included under Item 8.
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Description | Form | File No. | Exhibit Number | Filing/Effective Date | Filed Herewith | ||||||
| Restated and Amended Articles of Incorporation filed with the Secretary of State of California on December 13, 2001 | 10-KSB | 000-32565 | 3.3 | April 16, 2002 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on August 4, 2003 | SB-2 | 333-129839 | 3.01.1 | November 18, 2005 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on October 31, 2003 | 10-QSB | 000-32565 | 3.4 | November 19, 2003 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on September 29, 2005 | SB-2 | 333-129839 | 3.03 | November 18, 2005 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on August 20, 2007 | 10-Q | 000-32565 | 3.1 | August 14, 2007 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on June 30, 2011 | 8-K | 000-32565 | 3.1 | July 5, 2011 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on July 12, 2013 | 10-Q | 000-32565 | 3.1 | August 14, 2013 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on May 30, 2014 | S-3 | 333-196541 | 3.01.08 | June 5, 2014 | ||||||||
| Certificate of Amendment of Articles of Incorporation filed with the Secretary of State of California on February 15, 2017 | S-3 | 333-217131 | 3.1.9 | April 04, 2017 | ||||||||
| Certificate of Designation of the Rights, Preferences, and Privileges of the Series A Preferred Stock filed with the Secretary of State of California on December 13, 2001 | SB-2 | 333-89790 | 4.1 | June 4, 2002 | ||||||||
| Certificate of Determination, Preferences and Rights of Series B Convertible Preferred Stock filed with the Secretary of State of California on October 4, 2005 | 8-K | 000-32565 | 3.1 | October 4, 2005 | ||||||||
| Certificate of Determination, Preferences and Rights of Series C Convertible Preferred Stock filed with the Secretary of State of California on May 10, 2006 | 8-K | 000-32565 | 3.1 | May 15, 2006 | ||||||||
| Certificate of Determination, Preferences and Rights of the Series D Convertible Preferred Stock, filed with the Secretary of State of California on October 17, 2008 | 8-K | 000-32565 | 3.1 | October 20, 2008 | ||||||||
| Certificate of Determination, Preferences and Rights of the Series E Convertible Preferred Stock, filed with the Secretary of State of California on May 7, 2009 | 8-K | 000-32565 | 3.1 | May 8, 2009 | ||||||||
| Certificate of Determination, Preferences and Rights of the Series F Convertible Preferred Stock, filed with the Secretary of State of California on February 18, 2016 | 8-K | 000-32565 | 3.1 | February 23, 2016 | ||||||||
| Form of Certificate of Determination of Preferences and Rights of Series G Convertible Preferred Stock, filed with the Secretary of State of California on February 9, 2017 | 8-K | 000-32565 | 3.1 | February 15, 2017 | ||||||||
| Bylaws | SB-2 | 333-134957 | 3.05 | June 12, 2006 | ||||||||
| Amendment of Bylaws, effective June 19, 2007 | 8-K | 000-32565 | 3.1 | June 25, 2007 | ||||||||
| Amendment of Bylaws, effective December 4, 2009 | 8-K | 000-32565 | 3.1 | December 10, 2009 | ||||||||
| Amendment of Bylaws, effective as of February 13, 2017 | S-3 | 333-217131 | 3.9.4 | April 04, 2017 | ||||||||
| Amendment to Bylaws, effective July 30, 2019 | 8-K | 001-36245 | 3.1 | August 5, 2019 | ||||||||
Incorporated by Reference | ||||||||||||||
Exhibit Number | Exhibit Description | Form | File No. | Exhibit Number | Filing/Effective Date | Filed Herewith | ||||||||
3.01.01 |
|
| 10-KSB |
| 000-32565 |
| 3.3 |
| April 16, 2002 |
|
| |||
3.01.02 |
|
| SB-2 |
| 333-129839 |
| 3.01.1 |
| November 21, 2005 |
|
| |||
3.01.03 |
|
| 10-QSB |
| 000-32565 |
| 3.4 |
| November 19, 2003 |
|
| |||
3.01.04 |
|
| SB-2 |
| 333-129839 |
| 3.03 |
| November 21, 2005 |
|
| |||
3.01.05 |
|
| 10-Q |
| 000-32565 |
| 3.1 |
| August 14, 2007 |
|
| |||
3.01.06 |
|
| 8-K |
| 000-32565 |
| 3.1 |
| July 5, 2011 |
|
| |||
3.01.07 |
|
| 10-Q |
| 000-32565 |
| 3.1 |
| August 14, 2013 |
|
| |||
3.01.08 |
|
| S-3 |
| 333-196541 |
| 3.01.08 |
| June 5, 2014 |
|
| |||
3.01.09 |
|
| S-3 |
| 333-217131 |
| 3.1.9 |
| April 04, 2017 | |||||
3.01.10 | 10-Q | 001-36245 | 3.1 | August 12, 2020 | ||||||||||
3.02 |
|
| SB-2 |
| 333-89790 |
| 4.1 |
| June 4, 2002 |
|
| |||
3.03 |
|
| 8-K |
| 000-32565 |
| 3.1 |
| October 4, 2005 |
|
| |||
3.04 |
|
| 8-K |
| 000-32565 |
| 3.1 |
| May 15, 2006 |
|
| |||
3.05 |
|
| 8-K |
| 000-32565 |
| 3.1 |
| October 20, 2008 |
|
| |||
3.06 |
|
| 8-K |
| 000-32565 |
| 3.1 |
| May 8, 2009 |
|
| |||
3.07 |
|
| 8-K |
| 001-36245 |
| 3.1 |
| February 23, 2016 |
|
| |||
3.08 |
|
| 8-K |
| 001-36245 |
| 3.1 |
| February 15, 2017 |
|
| |||
3.09.1 |
|
| SB-2 |
| 333-134957 |
| 3.05 |
| June 12, 2006 |
|
| |||
3.09.2 |
|
| 8-K |
| 000-32565 |
| 3.1 |
| June 25, 2007 |
| ||||
3.09.3 |
|
| 8-K |
| 000-32565 |
| 3.1 |
| December 10, 2009 |
| ||||
| Incorporated by Reference | ||||||||||||||||||||
| Exhibit Number | ||||||||||||||||||||
| Exhibit Description | Form | |||||||||||||||||||
3.09.4 |
|
| S-3 |
| 333-217131 |
| 3.9.4 |
| April 04, 2017 |
| ||||
3.1 |
| 8-K |
| 001-36245 |
| 3.1 |
| August 5, 2019 | ||||||
3.10 | 8-K | 000-32565 | 3.01 | October 10, 2012 | ||||||||||
4.01 |
|
| 8-K |
| 001-36245 |
| 4.1 |
| October 1, 2014 |
| ||||
4.02 |
|
| 8-K |
| 001-36245 |
| 4.1 |
| February 15, 2017 |
| ||||
4.03 |
| 8-K |
| 001-36245 |
| 10.6 |
| May 15, 2015 |
| |||||
4.04 |
|
| 8-K |
| 001-36245 |
| 4.3 |
| February 15, 2017 |
| ||||
4.05 |
|
| 8-K |
| 001-36245 |
| 4.4 |
| February 15, 2017 |
| ||||
4.06 | X | |||||||||||||
10.01 | * | Employment Agreement with Todd T. Mitchell dated May 28, 2019 | 10-Q |
| 001-36245 |
| 10.2 |
| May 5, 2020 | |||||
10.02 | * | Amended and Restated 2014 Equity Incentive Plan, as amended on June 17, 2020 |
| 8-K |
| 001-36245 |
| 10.2 |
| July 17, 2020 | ||||
10.03 | * | Form of Award of Deferred and Restricted Stock Units for 2014 Equity Incentive Plan | 8-K |
| 001-36245 |
| 10.3 |
| July 17, 2020 | |||||
10.04 | * | Form of Stock Option Agreement for 2014 Equity Incentive Plan |
| 10-K |
| 001-36245 |
| 10.72 |
| March 31, 2015 |
| |||
10.05 | * | Form of Restricted Stock Award Agreement for 2014 Equity Incentive Plan |
| 10-K |
| 001-36245 |
| 10.73 |
| March 31, 2015 |
| |||
10.06 | * | 8-K |
| 001-36245 |
| 10.1 |
| October 3, 2018 | ||||||
10.07 | * | Form of Indemnification Agreement for officers and directors |
| 10-Q |
| 000-32565 |
| 10.2 |
| May 12, 2011 |
| |||
10.19 | |||||||||||||
8-K | 001-36245 | 10.1 | July 17, 2020 | ||||||||||
10.20 | 10-Q | 001-36245 | 10.4 | November 5, 2020 | ||||||||
| 10.21 | Employment Agreement (Offer Letter) with Peter G. Bradley dated August 12, 2020 | X | ||||||||||
21 |
|
|
| X | ||||||||
23.1 | X |
| Incorporated by Reference | |||||||||||||||||
| Exhibit Number | |||||||||||||||||
| Exhibit Description | File No. | Exhibit Number | Filing/Effective Date | Filed Herewith | |||||||||||||
24.1 | |||||||||||||
Power of Attorney – Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K.) | |||||||||||||
X | |||||||||||||
X | |||||||||||||
X | |||||||||||||
101.INS | @ | XBRL Instance Document | X |
101.SCH | @ | XBRL Taxonomy Extension Schema Document | ||||||||||
X | |||||||||||||
101.CAL | @ | XBRL Taxonomy Extension | X | ||||||||||
101.DEF | @ | XBRL Taxonomy Extension | X | ||||||||||
101.LAB | @ | XBRL Taxonomy Extension | X | ||||||||||
101.PRE | @ | XBRL Taxonomy Extension | X | ||||||||||
* | Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates. |
@ | 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 Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RICEBRAN TECHNOLOGIES | |||
Date: February 25, 2021 | By: | /s/ Peter G. Bradley | |
Peter G. Bradley | |||
Director and | |||
Each person whose signature appears below constitutes and appoints Brent Rystrom,Peter G. Bradley, true and lawful attorney-in-fact, with the power of substitution, for him/her in any and all capacities, to sign amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature | Title | Date | ||
Principal Executive Officer: | ||||
/s/ Peter G. Bradley | Director and Executive Chairman | February 25, 2021 | ||
Peter G. Bradley | ||||
Principal Financial Officer and Principal Accounting Officer: | ||||
/s/ Todd T. Mitchell | Chief Financial Officer | February 25, 2021 | ||
Todd T. Mitchell | ||||
Additional Directors: | ||||
/s/ Beth Bronner | Director | February 25, 2021 | ||
Beth Bronner | ||||
/s/ David I. Chemerow | Director | February 25, 2021 | ||
David I. Chemerow | ||||
/s/ Ari Gendason | Director | February 25, 2021 | ||
Ari Gendason | ||||
/s/ Brent D. Rosenthal | Director and Chairman | February 25, 2021 | ||
Brent D. Rosenthal |