SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
☐ | |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from __________ to __________ |
Commission File Number 001-36245
RiceBran Technologies
(Exact Name of Registrant as Specified in its Charter)
California (State or other jurisdiction of incorporation or organization) | 87-0673375 (I.R.S. Employer Identification No.) |
25420 Kuykendahl Rd., Suite B300 Tomball, TX (Address of Principal Executive Offices) | 77375 (Zip Code) |
(281) 675-2421
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last reportreport)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered | ||
Common Stock, no par value per share | RIBT | The NASDAQ Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☒ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule l2b-2 of the Exchange Act). Yes ☐ No ☒
As of November 3, 2022,August 21, 2023, there were 6,242,0776,607,776 shares of common stock outstanding.
Form 10-Q
PART I. FINANCIAL INFORMATION | Page | ||
Item 1. | 3 | ||
3 | |||
Condensed Consolidated Balance Sheets as of | 4 | ||
5 | |||
Notes to Unaudited Condensed Consolidated Financial Statements | 6 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | |||
Item 4. | |||
PART II. OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | 20 | ||
Signatures |
Cautionary Note about Forward-Looking Statements
This quarterly report on Form 10-Q contains “forward-looking statements” concerning our operations, economic performance and financial condition. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue, liquidity or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services, products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. The forward-looking statements contained herein reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Actual results may differ materially from those projected in such forward-looking statements due to a number of factors, risks and uncertainties, including the factors that may affect future results set forth in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. Forward-looking statements speak only as of the date on which they are made, and we disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this quarterly report.
Unless the context requires otherwise, references to “we,” “us,” “our” and “the Company” refer to RiceBran Technologies and its consolidated subsidiaries.
PART I. FINANCIAL INFORMATION
Condensed Consolidated Statements of Operations
(Unaudited) (in thousands, except share and per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
Revenues | $ | 10,252 | $ | 6,909 | $ | 31,001 | $ | 23,088 | $ | 6,269 | $ | 6,581 | $ | 12,113 | $ | 12,572 | ||||||||||||||||
Cost of goods sold | 10,949 | 7,185 | 31,673 | 22,539 | 6,245 | 6,970 | 12,147 | 12,993 | ||||||||||||||||||||||||
Gross profit (loss) | (697 | ) | (276 | ) | (672 | ) | 549 | 24 | (389 | ) | (34 | ) | (421 | ) | ||||||||||||||||||
Selling, general and administrative expenses | 1,765 | 1,802 | 5,165 | 5,476 | 1,644 | 1,215 | 3,102 | 2,585 | ||||||||||||||||||||||||
Loss (gain) on involuntary conversion of property and equipment | - | (1 | ) | (147 | ) | 5 | ||||||||||||||||||||||||||
Operating loss | (2,462 | ) | (2,077 | ) | (5,690 | ) | (4,932 | ) | ||||||||||||||||||||||||
Loss from continuing operations before other income (expense) | (1,620 | ) | (1,604 | ) | (3,136 | ) | (3,006 | ) | ||||||||||||||||||||||||
Interest income | 7 | - | 9 | 1 | 8 | 1 | 27 | 2 | ||||||||||||||||||||||||
Interest expense | (152 | ) | (121 | ) | (396 | ) | (353 | ) | (174 | ) | (105 | ) | (353 | ) | (218 | ) | ||||||||||||||||
Change in fair value of derivative warrant liability | 612 | - | 24 | - | (11 | ) | (417 | ) | (39 | ) | (588 | ) | ||||||||||||||||||||
Gain on extinguishment of PPP loan | - | - | - | 1,792 | ||||||||||||||||||||||||||||
Other expense | (39 | ) | (18 | ) | (111 | ) | (55 | ) | (43 | ) | (38 | ) | (103 | ) | (72 | ) | ||||||||||||||||
Other income | - | 3 | 5 | 3 | 9 | 1 | 265 | 5 | ||||||||||||||||||||||||
Loss before income taxes | (2,034 | ) | (2,213 | ) | (6,159 | ) | (3,544 | ) | ||||||||||||||||||||||||
Loss from continuing operations before income taxes | (1,831 | ) | (2,162 | ) | (3,339 | ) | (3,877 | ) | ||||||||||||||||||||||||
Income tax expense | (8 | ) | - | (20 | ) | (1 | ) | (5 | ) | (12 | ) | (11 | ) | (12 | ) | |||||||||||||||||
Loss from continuing operations | (1,836 | ) | (2,174 | ) | (3,350 | ) | (3,889 | ) | ||||||||||||||||||||||||
Loss from discontinued operations | (8,495 | ) | (447 | ) | (9,009 | ) | (248 | ) | ||||||||||||||||||||||||
Net loss | $ | (2,042 | ) | $ | (2,213 | ) | $ | (6,179 | ) | $ | (3,545 | ) | $ | (10,331 | ) | $ | (2,621 | ) | $ | (12,359 | ) | $ | (4,137 | ) | ||||||||
Loss per common share: | ||||||||||||||||||||||||||||||||
Basic | $ | (0.38 | ) | $ | (0.47 | ) | $ | (1.17 | ) | $ | (0.77 | ) | ||||||||||||||||||||
Diluted | $ | (0.38 | ) | $ | (0.47 | ) | $ | (1.17 | ) | $ | (0.77 | ) | ||||||||||||||||||||
Basic loss per common share: | ||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.27 | ) | $ | (0.41 | ) | $ | (0.50 | ) | $ | (0.74 | ) | ||||||||||||||||||||
Discontinued operations | (1.27 | ) | (0.09 | ) | (1.36 | ) | (0.05 | ) | ||||||||||||||||||||||||
$ | (1.54 | ) | $ | (0.50 | ) | $ | (1.86 | ) | $ | (0.79 | ) | |||||||||||||||||||||
Diluted loss per common share: | ||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.27 | ) | $ | (0.41 | ) | $ | (0.50 | ) | $ | (0.74 | ) | ||||||||||||||||||||
Discontinued operations | (1.27 | ) | (0.09 | ) | (1.36 | ) | (0.05 | ) | ||||||||||||||||||||||||
$ | (1.54 | ) | $ | (0.50 | ) | $ | (1.86 | ) | $ | (0.79 | ) | |||||||||||||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||||||||||||||
Basic | 5,332,308 | 4,745,684 | 5,290,780 | 4,631,880 | 6,722,938 | 5,286,164 | 6,645,886 | 5,269,672 | ||||||||||||||||||||||||
Diluted | 5,332,308 | 4,745,684 | 5,290,780 | 4,631,880 | 6,722,938 | 5,286,164 | 6,645,886 | 5,269,672 |
See Notes to Unaudited Condensed Consolidated Financial StatementStatements
Condensed Consolidated Balance Sheets
(Unaudited) (in thousands, except share amounts)
September 30, | December 31, | June 30 | December 31, | ||||||||||||||
2022 | 2021 | 2023 | 2022 | ||||||||||||||
ASSETS | |||||||||||||||||
Current assets: | Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 4,374 | $ | 5,825 | Cash and cash equivalents | $ | 302 | $ | 3,941 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $123 and $18 | 4,995 | 4,136 | |||||||||||||||
Accounts receivable, net of allowance for credit losses of $26 and $27 | Accounts receivable, net of allowance for credit losses of $26 and $27 | 3,368 | 3,703 | ||||||||||||||
Inventories | 2,687 | 2,444 | Inventories | 466 | 465 | ||||||||||||
Other current assets | 1,148 | 810 | Other current assets | 667 | 735 | ||||||||||||
Current assets held for sale | Current assets held for sale | - | 2,224 | ||||||||||||||
Total current assets | 13,204 | 13,215 | Total current assets | 4,803 | 11,068 | ||||||||||||
Property and equipment, net | 14,629 | 15,444 | Property and equipment, net | 6,213 | 6,020 | ||||||||||||
Operating lease right-of-use assets | 1,868 | 2,127 | Operating lease right-of-use assets | 26 | 77 | ||||||||||||
Intangible assets | 411 | 527 | Intangible assets | 323 | 380 | ||||||||||||
Long-term assets held for sale | Long-term assets held for sale | - | 9,888 | ||||||||||||||
Total assets | $ | 30,112 | $ | 31,313 | Total assets | $ | 11,365 | $ | 27,433 | ||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | Current liabilities: | ||||||||||||||||
Accounts payable | $ | 1,450 | $ | 826 | Accounts payable | $ | 1,441 | $ | 1,232 | ||||||||
Commodities payable | 1,960 | 1,702 | Commodities payable | 1,752 | 1,546 | ||||||||||||
Accrued salary, wages and benefits | 908 | 787 | Accrued salary, wages and benefits | 395 | 489 | ||||||||||||
Accrued legal | Accrued legal | 1,245 | 595 | ||||||||||||||
Accrued expenses | 941 | 683 | Accrued expenses | 708 | 500 | ||||||||||||
Operating lease liabilities, current portion | 417 | 382 | Operating lease liabilities, current portion | 36 | 107 | ||||||||||||
Due under bank line of credit | 1,846 | - | Due under bank line of credit | - | 1,832 | ||||||||||||
Due under factoring agreement, including the Over-advance | 4,926 | 3,379 | |||||||||||||||
Due under factoring agreement | Due under factoring agreement | 2,092 | 3,150 | ||||||||||||||
Due under insurance premium finance agreements | 429 | 128 | Due under insurance premium finance agreements | 360 | 185 | ||||||||||||
Finance lease liabilities, current portion | 130 | 86 | Finance lease liabilities, current portion | 141 | 113 | ||||||||||||
Long-term debt, current portion | 1,333 | 1,183 | Long-term debt, current portion | 1,287 | 988 | ||||||||||||
Current liabilities held for sale | Current liabilities held for sale | - | 540 | ||||||||||||||
Total current liabilities | 14,340 | 9,156 | Total current liabilities | 9,457 | 11,277 | ||||||||||||
Operating lease liabilities, less current portion | 1,613 | 1,948 | |||||||||||||||
Finance lease liabilities, less current portion | 357 | 100 | Finance lease liabilities, less current portion | 464 | 320 | ||||||||||||
Long-term debt, less current portion | 365 | 1,356 | Long-term debt, less current portion | 454 | 836 | ||||||||||||
Derivative warrant liability | 234 | 258 | Derivative warrant liability | 108 | 69 | ||||||||||||
Long-term liabilities held for sale | Long-term liabilities held for sale | - | 2,022 | ||||||||||||||
Total liabilities | 16,909 | 12,818 | Total liabilities | 10,483 | 14,524 | ||||||||||||
Commitments and contingencies | Commitments and contingencies | ||||||||||||||||
Shareholders' equity: | Shareholders' equity: | ||||||||||||||||
Preferred stock, 20,000,000 shares authorized: Series G, convertible, 3,000 shares authorized, stated value $150, 150 shares, issued and outstanding | 75 | 75 | |||||||||||||||
Common stock, no par value, 15,000,000 shares authorized, 5,242,077 shares and 5,158,967 shares, issued and outstanding | 327,166 | 326,279 | |||||||||||||||
Preferred stock, 20,000,000 shares authorized: | Preferred stock, 20,000,000 shares authorized: | ||||||||||||||||
Series G, convertible, 3,000 shares authorized, stated value $150,150 shares, issued and outstanding | Series G, convertible, 3,000 shares authorized, stated value $150,150 shares, issued and outstanding | ||||||||||||||||
Common stock, no par value, 15,000,000 shares authorized, 6,607,276 shares and 6,309,509 shares, issued and outstanding | Common stock, no par value, 15,000,000 shares authorized, 6,607,276 shares and 6,309,509 shares, issued and outstanding | 328,883 | 328,551 | ||||||||||||||
Accumulated deficit | (314,038 | ) | (307,859 | ) | Accumulated deficit | (328,076 | ) | (315,717 | ) | ||||||||
Total shareholders' equity | 13,203 | 18,495 | Total shareholders' equity | 882 | 12,909 | ||||||||||||
Total liabilities and shareholders' equity | $ | 30,112 | $ | 31,313 | Total liabilities and shareholders' equity | $ | 11,365 | $ | 27,433 |
See Notes to Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Cash Flows
(Unaudited) (in thousands)
Nine Months Ended September 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
Cash flow from operating activities: | ||||||||||||||||
Net loss | $ | (6,179 | ) | $ | (3,545 | ) | $ | (12,359 | ) | $ | (4,137 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||||||
Loss from discontinued operations | (9,009 | ) | (248 | ) | ||||||||||||
Loss from continuing operations | (3,350 | ) | (3,889 | ) | ||||||||||||
Adjustments to reconcile net loss to net cash used in operating activities of continuing operations | ||||||||||||||||
Depreciation | 1,575 | 1,821 | 465 | 440 | ||||||||||||
Amortization | 116 | 150 | 57 | 81 | ||||||||||||
Stock and share-based compensation | 887 | 840 | 239 | 323 | ||||||||||||
Change in fair value derivative warrant liability | (24 | ) | - | |||||||||||||
Loss (gain) on involuntary conversion of property and equipment | (147 | ) | 5 | |||||||||||||
Gain on extinguishment of PPP loan | - | (1,792 | ) | |||||||||||||
Provision for bad debts | 105 | 13 | ||||||||||||||
Change in fair value of derivative warrant liability | 39 | 588 | ||||||||||||||
Other | 1 | 54 | (16 | ) | 10 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (964 | ) | (18 | ) | 337 | (20 | ) | |||||||||
Inventories | (243 | ) | (295 | ) | (1 | ) | 227 | |||||||||
Accounts payable and accrued expenses | 1,094 | 594 | ||||||||||||||
Accounts payable and accrued liabilities | 611 | 454 | ||||||||||||||
Commodities payable | 258 | 619 | 206 | 10 | ||||||||||||
Other | (338 | ) | (431 | ) | 68 | (437 | ) | |||||||||
Net cash used in operating activities of continuing operations | (1,345 | ) | (2,213 | ) | ||||||||||||
Net cash provided by (used in) operating activities of discontinued operations | (211 | ) | 475 | |||||||||||||
Net cash used in operating activities | (3,859 | ) | (1,985 | ) | (1,556 | ) | (1,738 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (411 | ) | (1,187 | ) | (317 | ) | (132 | ) | ||||||||
Proceeds from insurance on involuntary conversion | 109 | 638 | ||||||||||||||
Net cash used in investing activities | (302 | ) | (549 | ) | ||||||||||||
Net cash used in investing activities of continuing operations | (317 | ) | (132 | ) | ||||||||||||
Net cash provided by (used in) investing activities of discontinued operations | 1,679 | (180 | ) | |||||||||||||
Net cash provided by (used in) investing activities | 1,362 | (312 | ) | |||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Advances on factoring agreement, including the Over-advance | 28,964 | 22,135 | ||||||||||||||
Advances on factoring agreement | 16,367 | 18,173 | ||||||||||||||
Payments on factoring agreement | (27,417 | ) | (21,970 | ) | (17,425 | ) | (18,387 | ) | ||||||||
Advances on bank line of credit | 2,725 | - | ||||||||||||||
Payments on bank line of credit | (900 | ) | - | |||||||||||||
Advances of bank line of credit | 37 | 1,800 | ||||||||||||||
Payments of bank line of credit | (1,869 | ) | - | |||||||||||||
Advances on insurance premium finance agreements | 928 | 962 | 450 | 794 | ||||||||||||
Payments on insurance premium finance agreements | (627 | ) | (677 | ) | (275 | ) | (392 | ) | ||||||||
Payments on long-term debt and finance lease liabilities | (963 | ) | (534 | ) | ||||||||||||
Proceeds from issuances of common stock and warrants, net of costs | - | 3,372 | ||||||||||||||
Proceeds from common stock warrant exercises | - | 171 | ||||||||||||||
Net cash provided by financing activities | 2,710 | 3,459 | ||||||||||||||
Proceeds from debt, net of issuance costs | 2,494 | - | ||||||||||||||
Payments of debt and finance lease liabilities | (2,764 | ) | (626 | ) | ||||||||||||
Net cash provided by (used in) financing activities of continuing operations | (2,985 | ) | 1,362 | |||||||||||||
Net cash used in financing activities of discontinued operations | (460 | ) | (13 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (3,445 | ) | 1,349 | |||||||||||||
Net change in cash and cash equivalents | $ | (1,451 | ) | $ | 925 | $ | (3,639 | ) | $ | (701 | ) | |||||
Cash and cash equivalents, beginning of period | $ | 5,825 | $ | 5,263 | $ | 3,941 | $ | 5,825 | ||||||||
Cash and cash equivalents, end of period | 4,374 | 6,188 | 302 | 5,124 | ||||||||||||
Net change in cash and cash equivalents | $ | (1,451 | ) | $ | 925 | $ | (3,639 | ) | $ | (701 | ) | |||||
Supplemental disclosures: | ||||||||||||||||
Supplemental disclosures, continuing operations: | ||||||||||||||||
Cash paid for interest | $ | 354 | $ | 267 | $ | 347 | $ | 205 | ||||||||
Cash paid for income taxes | $ | 19 | $ | 15 | $ | 20 | $ | 19 |
See Notes to Unaudited Condensed Consolidated Financial Statements
Notes to Unaudited Condensed Consolidated Financial Statements
In the opinion of management, the accompanying unaudited condensed consolidated financial statements (interim financial statements) of RiceBran Technologies and its subsidiaries were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and the rules and regulations of the Securities and Exchange Commission (the SEC) for reporting on Form 10-Q; therefore, they do not include all of the information and notes required by GAAP for complete financial statements. The interim financial statements contain all adjustments necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented of a normal and recurring nature necessary to present fairly the interim results of operations, financial position and cash flows for the periods presented.
These interim financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, which included all disclosures required by generally accepted accounting principles.
The results reported in these interim financial statements are not necessarily indicative of the results to be expected for the full fiscal year, or any other future period, and have been prepared based on the realization of assets and the satisfaction of liabilities in the normal course of business.
In August 2022, our board of directors approved a 1 for 10 reverse split of our common stock. Our common stock began trading on a post-split basis on August 26, 2022. All share and per share information has been retrospectively adjusted for all prior periods presented giving retroactive effect to the reverse stock split. Such adjustments include calculations of our weighted average number of shares outstanding and loss per share, as well as disclosures regarding our share-based compensation and warrants.
Certain reclassifications have been made to amounts reported for the prior periodsyear to achieve consistent presentation with the current period.year. Such reclassifications had no impact on previously reported net loss or shareholders’ equity.
NOTE2. BUSINESSLIQUIDITY AND MANAGEMENT’S PLANS
We are a specialty ingredient company focused onOur continuing operations include the development,results of operating our rice mill located in Wynne, Arkansas (Golden Ridge) and our barley and oats mill located in East Grand Forks, Minnesota (MGI). Until June 23, 2023, as discussed further in Note 3, our operations included the production of stabilized rice bran and marketingprocessing of products derived from traditional and ancient small grains. We create and produce products utilizing proprietary processes to deliver improved nutrition, ease of use, and extended shelf-life, while addressing consumer demand for all natural, non-GMO and organic products. We believe our products can become valuable alternatives to traditional food ingredients.
Notably, we apply our proprietary technologies to convert rawstabilized rice bran into stabilized rice bran (SRB),derivatives at facilities located in West Sacramento, California, Mermentau, Louisiana, Lake Charles, Louisiana and high value-added derivative products including: RiBalance, a rice bran nutritional package derived from SRB; RiSolubles, a nutritious, carbohydrate and lipid rich fraction of RiBalance; RiFiber, a fiber rich insoluble derivative of RiBalance and ProRyza, a rice bran protein-based product; and a variety of other valuable derivatives extracted from these core products.Dillon, Montana (the SRB Business).
In granular form, SRB isOur history of operating losses and negative operating cash flows from continuing operations raised substantial doubt about our ability to continue as a food additive used in products for humangoing concern before consideration of management’s plans, however after consideration of management’s plans and animal consumption. Wethe factors below, we believe SRBsubstantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued has certain qualitiesbeen alleviated. The factors that make it more attractive than additives based onalleviated the by-products of other agricultural commodities, such as corn, soybeans, wheat, and yeast. Our SRB products and SRB derivatives support the production of healthy, natural, hypoallergenic, gluten free, and non-genetically modified ingredients and supplements for use in meats, baked goods, cereals, coatings, health foods, and high-end animal nutrition. Our target customerssubstantial doubt are food and animal nutrition manufacturers, wholesalers and retailers, both domestically and internationally.summarized below:
● | Improving Operating Cash Flows - Golden Ridge has been a significant source of operating losses for us since its acquisition in 2018, however it made its first positive quarterly contribution to operating cash flows in the fourth quarter of 2022 and operations continue to improve. MGI, which has been consistently profitable since its acquisition in 2019, saw a significant increase in sales and profit contribution in the fourth quarter of 2022 due to additional capacity coming online in the third quarter of 2022 after a major capital expansion, which has continued in 2023. The transition of Golden Ridge to positive operating cash flows and expansion in MGI’s contribution to operating cash flows, together with the steps we have taken to lower our run rate for selling, general administrative expenses, should provide us with a pathway to improved operating cash flows. |
● | Access to Equity Funding - We could raise additional capital from offerings of equity, including common equity and equivalents. We successfully completed equity raises in both 2022 and 2021. |
● | Ability to Leverage and/or Sell Real Property - We have been able to supplement liquidity by borrowing against our real property located in Wynne, Arkansas. We also own our facility in East Grand Forks, Minnesota. We could sell or mortgage these facilities to provide additional liquidity. |
● | Strategic Review Process - In light of our challenges in achieving our operating and financial targets, we are continuing our strategic review of all the possible alternatives to generate improved returns to our shareholders. |
We manufacture and distribute SRB from four locations: two facilities located within supplier-owned rice mills in Arbuckle and West Sacramento, California; one company-owned facility in Mermentau, Louisiana; and our own rice mill in Wynne, Arkansas. At our Dillon, Montana facility, we produce SRB-based products and derivatives through proprietary processes. Our rice mill in Wynne, Arkansas (Golden Ridge) supplies grades U.S.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 3. DISCONTINUED OPERATIONS
We continuously assess the composition of our portfolio to ensure it is aligned with our strategic objectives and positioned to maximize return to our shareholders. On June 23, 2023, we completed the sale of our assets related to the SRB Business for $1.8 million in cash and the assumption of $1.7 million of real estate operating lease and other liabilities. The sale agreement contains customary representations, warranties and covenants.
We estimated the proceeds, net of expenses, at $1.4 million, and the net carrying value of the SRB Business assets and liabilities assumed as of the date of sale at $10.0 million for a loss on sale of $8.6 million. The estimated loss on sale includes no provision for income taxes as it is anticipated the tax benefit for the expected tax loss on disposition will not be realized based on our current U.S. valuation allowance position.
In consideration of a lender's consent to the sale and release of securities interests and liens on SRB Business assets, we paid a portion of the amount outstanding on our mortgage promissory note, not exclusively related to the SRB Business, from proceeds of the sale. In addition, we paid liabilities for accumulated paid time off to the employees of the SRB Business. The following table summarizes the initial distribution of proceeds (in thousands).
Purchase price | $ | 1,800 | ||
Estimated expenses accrued as of June 30, 2023 | (375 | ) | ||
Net proceeds | $ | 1,425 | ||
Repayment of mortgage promissory note | $ | 450 | ||
Payment of paid time off liabilities | 215 | |||
$ | 665 |
The following table summarizes the estimated carrying amounts of the SRB Business as of June 23, 2023, the date of sale (in thousands).
Inventories | $ | 2,252 | ||
Other current assets | 185 | |||
Property and equipment | 7,710 | |||
Operating lease right of use assets | 1,566 | |||
Total assets | 11,713 | |||
Accrued expenses | 9 | |||
Operating lease liabilities | 1,668 | |||
Finance lease liabilities | 12 | |||
Long-term debt | 14 | |||
Total liabilities | 1,703 | |||
Net assets sold | $ | 10,010 |
We determined that the disposal met the criteria for presentation as discontinued operations in the second quarter of 2023. Accordingly, SRB Business results are presented as discontinued operations in our consolidated statements of operations and are excluded from continuing operations for all periods presented. In addition, the SRB Business assets and liabilities are classified as held for sale in our consolidated balance sheets for all periods presented.
The operations of the SRB Business are included in our results through the June 23, 2023, date of sale. The following two tables represent activity up to the date of the sale.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
The following table summarizes the major line items included in loss from discontinued operations related to the SRB Business and divestiture (in thousands).
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues | $ | 3,432 | $ | 3,609 | $ | 6,857 | $ | 8,177 | ||||||||
Cost of goods sold | (3,147 | ) | (3,697 | ) | (6,796 | ) | (7,731 | ) | ||||||||
Selling, general and administrative expenses | (184 | ) | (493 | ) | (457 | ) | (815 | ) | ||||||||
Gain on involuntary conversion | - | 147 | - | 147 | ||||||||||||
Interest expense | (11 | ) | (13 | ) | (28 | ) | (26 | ) | ||||||||
Loss from operations of discontinued operations | 90 | (447 | ) | (424 | ) | (248 | ) | |||||||||
Loss on sale | (8,585 | ) | - | (8,585 | ) | - | ||||||||||
Loss from discontinued operations | $ | (8,495 | ) | $ | (447 | ) | $ | (9,009 | ) | $ | (248 | ) | ||||
Depreciation included in cost of goods sold | $ | 338 | $ | 291 | $ | 646 | $ | 606 | ||||||||
Capital expenditures | $ | 35 | $ | 253 | $ | 111 | $ | 289 |
The following table summarizes the major line items included in cash flows from discontinued operations related to the SRB Business and divestiture (in thousands).
Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Net cash provided by (used in) operating activities | $ | (211 | ) | $ | 475 | |||
Net cash provided by (used in) investing activities | 1,679 | (180 | ) | |||||
Net cash used in financing activities | (460 | ) | (13 | ) | ||||
Net cash provided to continuing operations | 1,008 | 282 |
In the six months ended June 2023, net cash provided by investing activities in the table above is presented in our consolidated statements of cash flows in net cash provided by investing activities of discontinued operations and includes the $1.8 million net proceeds from the sale of the SRB Business. In the six months ended June 2023, net cash used in financing activities in the table above is presented in our consolidated statements of cash flows used in financing activities of discontinued operations and includes the $0.5 million repayment of our mortgage promissory note from the initial proceeds from the sale.
The following table summarizes the carrying amounts of major classes of SRB Business assets and liabilities classified as held for sale as of December 31, 2022 (in thousands).
Inventories | $ | 1,913 | ||
Other current assets | 311 | |||
Property and equipment | 8,187 | |||
Operating lease right of use assets | 1,701 | |||
Total assets held for sale | $ | 12,112 | ||
Accrued expenses, including paid time off liabilities of employees of the SRB business | $ | 236 | ||
Operating lease liabilities | 1,841 | |||
Finance lease liabilities | 17 | |||
Long-term debt, including $450 of mortgage promissory note, not exclusively related to the SRB business | 468 | |||
Total liabilities held for sale | $ | 2,562 |
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent accounting standards not yet adopted
The following discusses theThere are no accounting standard(s) not yet adopted that will, or are expected to, result in a significant change in practice and/or have a significant financial impact on our financial position, results of operations or cash flows.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Recently adopted accounting standards.
In June 2016, the Financial Accounting Standards Board (FASB) issued guidance ASU No. 2016-13 Financial Instruments - —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which changes the accounting for credit losses for certain instruments, including trade receivables, from an incurred loss method to a current expected loss method. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. TheWe adopted the guidance, and subsequent guidance related to the topic, is effective for our annual and interim periods beginning in 2023 and we must adopt the guidance on a modified retrospective approach through cumulative-effect adjustment to retained earnings as of January 1, 2023. Based on the nature of our current receivables and our credit loss history, we do not expect the adoption2023. Adoption of the guidance to have astandard had no significant impact on our results of operations, financial position, or cash flows.flows as of January 1,2023. Our provision for doubtful accounts, recoveries of doubtful accounts and accounts receivable charge-offs were immaterial in all periods presented.
NOTE 4. CASH AND CASH EQUIVALENTS
As of September 30, 2022, we have $2.7 million of cash and cash equivalents invested in a money market fund with net assets invested in U.S. Dollar denominated money market securities of domestic and foreign issuers, U.S. Government securities and repurchase agreements. We consider all liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
We have cash on deposit in excess of federally insured limits at a bank. We do not believe that maintaining substantially all such assets with the bank or investing in a liquid mutual fund represent material risks.
NOTE 5. ACCOUNTS RECEIVABLE AND REVENUES
Amounts billed and due from our customers are classified as accounts receivable on our consolidated balance sheets and require payment on a short-term basis. Invoices are generally issued at the point control transfers and substantially all of our invoices are due within 30 days or less, however certain customers have terms of up to 120 days. For substantially all of our contracts, control of the ordered product(s) transfers at our location. Periodically, we require payment prior to the point in time we recognize revenue. We classify amounts received from customers prior to revenue recognition on a contract as customer prepayments liability on our consolidated balance sheets. We typically apply customer prepayments to an invoice within 30 days of the prepayment. Revenues in the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, include $0.1 million, or less, in unearned revenue as of the end of the prior year.
Our accounts receivable potentially subject us to significant concentrations of credit risk. Revenues and accounts receivable from significant customers (customers with revenue or accounts receivable in excess of 10% of consolidated totals) are stated below as a percentpercentage of consolidated totals.
Customer | ||||||||||||||||
A | B | C | D | |||||||||||||
% of revenues, three months ended September 30, 2022 | 15 | % | 5 | % | 11 | % | - | % | ||||||||
% of revenues, three months ended September 30, 2021 | 21 | % | 7 | % | - | % | 9 | % | ||||||||
% of revenues, nine months ended September 30, 2022 | 13 | % | 8 | % | 5 | % | 2 | % | ||||||||
% of revenues, nine months ended September 30, 2021 | 10 | % | 11 | % | 1 | % | 11 | % | ||||||||
% of accounts receivable, as of September 30, 2022 | 13 | % | 7 | % | 17 | % | - | % | ||||||||
% of accounts receivable, as of December 31, 2021 | 15 | % | 8 | % | - | % | 9 | % |
Customer | ||||||||||||||||
A | B | C | D | |||||||||||||
% of revenues, three months ended June 30, 2023 | 32 | % | 16 | % | 13 | % | 4 | % | ||||||||
% of revenues, three months ended June 30, 2022 | 5 | % | 20 | % | 13 | % | 15 | % | ||||||||
% of revenues, six months ended June 30, 2023 | 29 | % | 14 | % | 12 | % | 3 | % | ||||||||
% of revenues, six months ended June 30, 2022 | 3 | % | 20 | % | 11 | % | 17 | % | ||||||||
% of accounts receivable, as of June 30, 2023 | 25 | % | 6 | % | - | % | - | % | ||||||||
% of accounts receivable, as of December 31, 2022 | 19 | % | 12 | % | 4 | % | - | % |
The following table presents disaggregated revenues by geographic area shipped to(in thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Rice products | $ | 4,258 | $ | 3,767 | $ | 8,091 | $ | 7,175 | ||||||||
Barley products | 1,688 | 2,117 | 3,274 | 3,930 | ||||||||||||
Other | 323 | 697 | 748 | 1,467 | ||||||||||||
Revenues | $ | 6,269 | $ | 6,581 | $ | 12,113 | $ | 12,572 |
NOTE 6. INVENTORIES
The following table details the components of inventories (in thousands).
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
United States | $ | 9,876 | $ | 6,450 | $ | 30,034 | $ | 21,867 | ||||||||
Other countries | 376 | 459 | 967 | 1,221 | ||||||||||||
Revenues | $ | 10,252 | $ | 6,909 | $ | 31,001 | $ | 23,088 |
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
Finished goods | $ | 241 | $ | 228 | ||||
Raw materials | 205 | 212 | ||||||
Packaging | 20 | 25 | ||||||
Inventories | $ | 466 | $ | 465 |
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 6.7. PROPERTY AND EQUIPMENT
The following table details the components of property and equipment (amounts in thousands).
September 30, | December 31 | June 30, | December 31, | ||||||||||||||||||
2022 | 2021 | Estimated Useful Lives | 2023 | 2022 | Estimated Useful Lives | ||||||||||||||||
Land | $ | 730 | $ | 730 | $ | 493 | $ | 493 | |||||||||||||
Furniture and fixtures | 259 | 265 | 5 | - | 10 years | 71 | 71 | 7-10 years | |||||||||||||
Plant | 10,094 | 10,457 | 20 | - | 40 years, or life of lease | 3,440 | 3,440 | 20-40 years, or life of lease | |||||||||||||
Computer and software | 450 | 452 | 3 | - | 5 years | 382 | 382 | 3-5 years | |||||||||||||
Leasehold improvements | 1,838 | 1,828 | 4 | - | 15 years, or life of lease | 151 | 152 | 5-6 years | |||||||||||||
Machinery and equipment | 15,598 | 15,115 | 5 | - | 15 years | 6,417 | 5,758 | 5-15 years | |||||||||||||
Property and equipment, cost | 28,969 | 28,847 | 10,954 | 10,296 | |||||||||||||||||
Less accumulated depreciation | 14,340 | 13,403 | 4,741 | 4,276 | |||||||||||||||||
Property and equipment, net | $ | 14,629 | $ | 15,444 | $ | 6,213 | $ | 6,020 |
Amounts payable for property and equipment included in accounts payable and accrued liabilities totaled $0.1 million at September 30, 2022, and $0.2 million at December 31, 2021.2022. Assets which had not yet been placed in service, included in property and equipment, totaled $1.1$0.3 million at SeptemberJune 30, 2022,2023, and $0.9$0.6 million at December 31, 2021.2022.
NOTE 7.8. LEASES
The components of lease expense and cash flows from leases (in thousands) follow.
Three Months Ended September 30, | Nine Months Ended Setepmber 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
Finance lease cost: | ||||||||||||||||||||||||||||||||
Amortization of right-of use assets, included in cost of goods sold | $ | 20 | $ | 24 | $ | 59 | $ | 67 | ||||||||||||||||||||||||
Amortization of right-of-use assets, included in cost of goods sold | $ | 36 | $ | 16 | $ | 49 | $ | 33 | ||||||||||||||||||||||||
Interest on lease liabilities | 6 | 2 | 11 | 8 | 9 | 2 | 26 | 4 | ||||||||||||||||||||||||
Operating lease cost, included in selling, general and administrative expenses: | ||||||||||||||||||||||||||||||||
Fixed leases cost | 129 | 129 | 387 | 387 | 26 | 26 | 53 | 53 | ||||||||||||||||||||||||
Variable lease cost | 39 | 37 | 125 | 112 | 20 | 20 | 41 | 46 | ||||||||||||||||||||||||
Short-term lease cost | 41 | 21 | 62 | 60 | 34 | 14 | 76 | 21 | ||||||||||||||||||||||||
Total lease cost | $ | 235 | $ | 213 | $ | 644 | $ | 634 | $ | 125 | $ | 78 | $ | 245 | $ | 157 | ||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||||||||||||||
Operating cash flows from finance leases | $ | 6 | $ | 2 | $ | 11 | $ | 8 | $ | 9 | $ | 2 | $ | 26 | $ | 4 | ||||||||||||||||
Operating cash flows from operating leases | $ | 129 | $ | 129 | $ | 387 | $ | 387 | $ | 26 | $ | 26 | $ | 53 | $ | 53 | ||||||||||||||||
Financing cash flows from finance leases | $ | 22 | $ | 23 | $ | 68 | $ | 73 | $ | 45 | $ | 21 | $ | 78 | $ | 38 |
As of SeptemberJune 30, 2022,2023, variable lease payments do not depend on a rate or index. As of SeptemberJune 30, 2022, and December 31, 2021,2023, property and equipment, net, includes $0.6 million and $0.2$0.7 million of finance lease right-of-use-assets, with an original cost of $0.9 million as of September 30, 2022, and $0.5 million asmillion. As of December 31, 2021.2022, property and equipment, net, includes $0.8 million of finance lease right-of-use-assets, with an original cost of $0.9 million. During the three months and ninesix months ended SeptemberJune 30, 2022,2023, we financed the purchase of $0.1 million and $0.3$0.2 million of property and equipment in noncash finance lease transactions. During the three months and ninesix months ended SeptemberJune 30, 2021,2022, we financed the purchase of less than $0.1 million of property and equipment in noncash finance lease transactions.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
As of SeptemberJune 30, 2022,2023, we do not believe it is certain that we will exercise any renewal options. The remaining terms of our leases and the discount rates used in the calculation of our lease liabilities as of SeptemberJune 30, 2022,2023, follows.
Operating Leases | Finance Leases | |||||||||||
Remaining leases terms (in years) | 1.0 | - | 10.4 | 0.4 | - | 5.0 | ||||||
Weighted average remaining lease terms (in years) | 5.7 | 3.0 | ||||||||||
Discount rates | 6.3% | - | 9.0% | 2.8% | - | 10.4% | ||||||
Weighted average discount rate | 7.8% | 8.1% |
Operating Leases | Finance Leases | |||||||
Remaining leases terms (in years) | 0.3 | 0.7-4.6 | ||||||
Weighted average remaining lease terms (in years) | 0.3 | 4.1 | ||||||
Discount rates | 6.3 | % | 2.8%-11.6 | % | ||||
Weighted average discount rate | 6.3 | % | 9.5 | % |
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Maturities of lease liabilities as of SeptemberJune 30, 2022,2023, followsfollow (in thousands).
Operating | Finance | Operating | Finance | |||||||||||||
Leases | Leases | Leases | Leases | |||||||||||||
2022 (three months ended December 31, 2022) | $ | 122 | $ | 52 | ||||||||||||
2023 | 528 | 158 | ||||||||||||||
2023 (six months ended December 31, 2023) | $ | 37 | $ | 114 | ||||||||||||
2024 | 429 | 117 | - | 177 | ||||||||||||
2025 | 440 | 102 | - | 167 | ||||||||||||
2026 | 450 | 100 | - | 165 | ||||||||||||
2027 | - | 126 | ||||||||||||||
Thereafter | 578 | 60 | - | 4 | ||||||||||||
Total lease payments | 2,547 | 589 | 37 | 753 | ||||||||||||
Amounts representing interest | (517 | ) | (102 | ) | (1 | ) | (148 | ) | ||||||||
Present value of lease obligations | $ | 2,030 | $ | 487 | $ | 36 | $ | 605 |
NOTE 8.9. DEBT
We finance certain amounts owed for annual insurance premiums under financing agreements. As of SeptemberJune 30, 2022,2023, amounts due under insurance premium financing agreements are due in monthly installments of principal and interest through March 2023,2024, at an average annual interest ratesrate of 3.5% to 3.9% per year.7.4%.
We borrow under a factoring agreement with a lender (the Lender), which provides a $7.0 million credit facility. We may only borrow to the extent we have qualifying accounts receivable to use as collateral as defined in the agreement. The facility had an initial two-year term and automatically renews for successive annual periods until delivery of a proper termination notice. The facility term has automatically extended to October 2023.We paid a $0.2 million facility fee upon inception of the agreement which amortized to interest expense on a straight-line basis over the two years ending in October 2021. We incur recurring fees under the agreement, including a funding fee of 0.5% above the prime rate, in no event to be less than 5.5%, on any advances, and a service fee on average net funds borrowed. The lenderLender has a security interest in our assets and the right to demand repayment of the advances at any time. The Lender has a security interest in our personal property assets.
The Lender also advanced us $0.9 million effective September 30, 2022 (the Over-advance), pending restructuring of our mortgage promissory note with the Lender. The Over-advance accruesaccrued interest at an annual rate which iswas the greater of 7.0% above the Lender's prime rate (14.5% at December 31, 2022) and 10.3% (13.3% atuntil it was repaid in September 30, 2022).January 2023. The Over-advance is due the earlierAs of the completion of the restructuring of the mortgage promissory note or December 29, 2022.31, 2022, the Over-advance was classified as long-term debt in our consolidated balance sheet as it was refinanced on a long-term basis in January 2023, as discussed below.
Additional information related to our factoring obligation (exclusive of the Over-advance) follows.follows (in thousands).
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Average borrowings outstanding (in thousands) | $ | 3,150 | $ | 1,522 | $ | 3,036 | $ | 1,324 | ||||||||
Amortization of debt issuance costs (in thousands) | $ | - | $ | 23 | $ | - | $ | 68 | ||||||||
Interest paid, as a percentage of average outstanding borrowings | 1.6 | % | 2.0 | % | 1.4 | % | 5.0 | % | ||||||||
Fees paid, as a percentage of average outstanding borrowings | 1.6 | % | 1.6 | % | 1.2 | % | 5.0 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Average borrowings outstanding | $ | 3,019 | $ | 3,131 | $ | 2,895 | $ | 2,977 | ||||||||
Interest paid on borrowings | 72 | 48 | 134 | 91 | ||||||||||||
Fees paid on borrowings | 44 | 27 | 105 | 63 |
As of September 30, 2022, we had $1.8 million outstanding under a line of credit with a bank. The borrowing is secured by our cash on deposit with the bank and bears interest at prime (6.3% at September 30, 2022). There are no stipulated repayment terms for the line as long as we maintain sufficient cash collateral. Our borrowings under the line of credit averaged $1.5 million in the three months ended September 30, 2022, and $0.5 million for the nine months ended September 30, 2022.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
During the six months ended June 30, 2023, we borrowed under a line of credit with a bank. The borrowing was secured by our cash on deposit with the bank and bore interest at prime. There were no stipulated repayment terms for the line as long as we maintained sufficient cash collateral. We repaid the amounts borrowed under the line of credit in full in April 2023. Our borrowings under the line of credit averaged less than $0.1 million during the three months ended June 30, 2023, and $0.9 million in the six months ended June 30, 2023. During the six months ended June 30, 2023, the average annual interest rate of on borrowings was 7.6%.
Long-term debt consists of the following (in thousands).
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
Mortgage promissory note - Originally dated July 2020 and modified in December 2021. As modified, interest accrues at an annual rate which is the greater of 7.0% above the Lender's prime rate and 10.3% (13.3% at September 30, 2022) payable in monthly installments through December 2023. Net of $11 debt issuance costs at September 30, 2022. Face amount $2.5 million. Secured by certain real property in Wynne, Arkansas. | $ | 1,614 | $ | 2,469 | ||||
Progress payment agreement - Dated August 2022. Original principal $37. Interest is payable monthly at the rate of 25.2% per year. Due in November 2022, unless a finance lease is executed with the lender before that date for the related equipment. | 37 | - | ||||||
Equipment note - Dated May 2021. Original principal $46. Due in monthly installments through June 2025. Interest accrues at the effective discount rate of 3.6% per year. | 27 | 33 | ||||||
Equipment note - Dated December 2019. Original principal $40. Due in monthly installments through December 2024. Interest accrues at the effective discount rate of 9.3% per year. | 20 | 26 | ||||||
Equipment note - Initially recorded in November 2018, in an acquisition, at the present value of future payments using a discount rate of 4.8% per year. Due in monthly installments through August 2022. | - | 11 | ||||||
Total long-term debt, net | $ | 1,698 | $ | 2,539 |
June 30, 2023 | December 31, 2022 | |||||||
Mortgage promissory note - Originally dated July 2020. As subsequently modified, interest accrues at an annual rate which is the greater of 7.0% above the Lender's prime rate (15.3% at June 30, 2023) and 10.3% and payable in monthly installments through September 2024. Face amount $2.5 million. Secured by certain real property in Arkansas. December 31, 2022, excludes $450 thousand allocated to discontinued operations. | $ | 1,578 | $ | 1,761 | ||||
Equipment note - Dated May 2021. Original principal $46 thousand. Due in monthly installments through June 2025. Interest accrues at the effective discount rate of 3.6% per year. | 20 | 24 | ||||||
Equipment note - Dated June 2023. Original principal $144 thousand. Due in monthly installments through August 2025. Interest accrues at the effective discount rate of 14.0% per year. | 143 | - | ||||||
Progress payment agreement - Dated August 2022. Original principal $37 thousand. Interest was payable monthly at the rate of 25.2% per year until obligation was transferred to a finance lease in February 2023. | - | 39 | ||||||
Total long-term debt, net | $ | 1,741 | $ | 1,824 |
In January 2023, we entered into agreements with the Lender to effect a modification of the terms of the mortgage promissory note. This modification involved us entering into a new mortgage promissory note in the principal amount of $2.5 million. We received $0.3 million in cash, and the Lender applied the remainder of the new principal to the $1.3 million then outstanding on the prior mortgage promissory note and the $0.9 million Over-advance. Under the terms of the January 2023 note, (i) interest accrues at the same rate as the prior note, an annual rate which is the greater of 7.0% above the Lender’s prime rate and 10.3%, and (ii) principal and interest were payable in equal monthly installments through January 2025, under the January note. We made a $450 thousand principal payment from the SRB Business sale proceeds in June 2023, and the note now matures in September 2024. Prior to the January 2023 modification, principal and interest were payable in equal monthly installments through December 2023. The note is secured by a mortgage on our real property in Arkansas. The current portion of long-term debt on the consolidated balance sheet as of December 31, 2022, reflects the terms of the January 2023 modification.
Future principal maturities of long-term debt outstanding as of SeptemberJune 30, 2022,2023, follow (in thousands).
2022 (three months ended December 31, 2022) | $ | 347 | ||||||
2023 | 1,337 | |||||||
2023 (six months ended December 31, 2023) | $ | 626 | ||||||
2024 | 19 | 1,070 | ||||||
2025 | 5 | 54 | ||||||
Principal maturities | 1,708 | 1,750 | ||||||
Debt issuance costs | (10 | ) | (9 | ) | ||||
Total long-term debt, net | $ | 1,698 | $ | 1,741 |
NOTE 9. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS
In August 2022, our board of directors approved a 1 for 10 reverse split of our common stock. Our common stock began trading on a post-split basis on August 26, 2022. All share and per share information has been retrospectively adjusted for all prior periods presented giving retroactive effect to the reverse stock split. Such adjustments include calculations of our weighted average number of shares outstanding and loss per share, as well as disclosures regarding our share-based compensation and warrants.
On July 14, 2022, shareholders approved a 600,000 share increase in the number of shares of common stock authorized for issuance under our Amended and Restated 2014 Equity Incentive Plan (the 2014 Plan). As of September 30, 2022, 228,201 shares of common stock remained available for issuance under the 2014 Plan.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 10. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS
A summary of equity activity for the three and six months ended June 30, 2023 and 2022, follows (in thousands, except share amounts).
Shares | Shares | |||||||||||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Accumulated | Preferred | Preferred | Common | Accumulated | |||||||||||||||||||||||||||||||||||||||||
Series G | Common | Stock | Stock | Deficit | Equity | Series G | Common | Stock | Stock | Deficit | Equity | |||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 150 | 5,158,967 | $ | 75 | $ | 326,279 | $ | (307,859 | ) | $ | 18,495 | |||||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | 150 | 6,309,509 | $ | 75 | $ | 328,551 | $ | (315,717 | ) | $ | 12,909 | |||||||||||||||||||||||||||||||||||||
Common stock awards under equity incentive plans | - | 22,475 | - | 241 | - | 241 | - | 68,693 | - | 300 | - | 300 | ||||||||||||||||||||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 5 | - | 5 | ||||||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | (1,516 | ) | (1,516 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | 150 | 5,182,042 | 75 | 326,525 | (309,375 | ) | 17,225 | |||||||||||||||||||||||||||||||||||||||||
Common stock awards under equity incentive plans | - | 48,388 | - | 146 | - | 146 | ||||||||||||||||||||||||||||||||||||||||||
Stock units issued to vendor | - | 6,132 | - | 23 | - | 23 | ||||||||||||||||||||||||||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 1 | - | 1 | - | 600 | - | 1 | - | 1 | ||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | (2,621 | ) | (2,621 | ) | - | - | - | - | (2,028 | ) | (2,028 | ) | ||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | 150 | 5,231,030 | 75 | 326,672 | (311,996 | ) | 14,751 | |||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | 150 | 6,384,934 | 75 | 328,875 | (317,745 | ) | 11,205 | |||||||||||||||||||||||||||||||||||||||||
Common stock awards under equity incentive plans | - | - | 492 | - | 492 | - | 221,742 | - | (12 | ) | - | (12 | ) | |||||||||||||||||||||||||||||||||||
Stock units issued to vendor | - | - | - | 19 | - | 19 | ||||||||||||||||||||||||||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 2 | - | 2 | - | 600 | - | 1 | - | 1 | ||||||||||||||||||||||||||||||||||||
Other | - | 10,447 | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | (2,042 | ) | (2,042 | ) | - | - | - | - | (10,331 | ) | (10,331 | ) | ||||||||||||||||||||||||||||||||
Balance, September 30, 2022 | 150 | 5,242,077 | $ | 75 | $ | 327,166 | $ | (314,038 | ) | $ | 13,203 | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2023 | 150 | 6,607,276 | $ | 75 | $ | 328,883 | $ | (328,076 | ) | $ | 882 |
Shares | ||||||||||||||||||||||||
Preferred | Preferred | Common | Accumulated | |||||||||||||||||||||
Series G | Common | Stock | Stock | Deficit | Equity | |||||||||||||||||||
Balance, December 31, 2020 | 225 | 4,523,809 | $ | 112 | $ | 322,218 | $ | (298,910 | ) | $ | 23,420 | |||||||||||||
Common stock awards under equity incentive plans | - | 2,994 | - | 250 | - | 250 | ||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 3 | - | 3 | ||||||||||||||||||
Other | - | - | - | (3 | ) | - | (3 | ) | ||||||||||||||||
Net income | - | - | - | - | 591 | 591 | ||||||||||||||||||
Balance, March 31, 2021 | 225 | 4,527,403 | 112 | 322,468 | (298,319 | ) | 24,261 | |||||||||||||||||
Common stock awards under equity incentive plans | - | 2,964 | - | 290 | - | 290 | ||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 5 | - | 5 | ||||||||||||||||||
Exercise of common stock warrants | - | 17,794 | - | 171 | - | 171 | ||||||||||||||||||
Other | - | - | - | 3 | - | 3 | ||||||||||||||||||
Net loss | - | - | - | - | (1,923 | ) | (1,923 | ) | ||||||||||||||||
Balance, June 30, 2021 | 225 | 4,548,761 | 112 | 322,937 | (300,242 | ) | 22,807 | |||||||||||||||||
Common stock awards under equity incentive plans | - | 38,978 | - | 287 | - | 287 | ||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 5 | - | 5 | ||||||||||||||||||
Sale of common stock and common stock warrants, net of costs | - | 3,062,395 | - | 2,725 | - | 2,725 | ||||||||||||||||||
Exercise of common stock warrant | - | 1,500,000 | - | - | - | - | ||||||||||||||||||
Conversion of preferred stock into common stock | (75 | ) | 71,174 | (37 | ) | 37 | - | - | ||||||||||||||||
Net loss | - | - | - | - | (2,213 | ) | (2,213 | ) | ||||||||||||||||
Balance, September 30, 2021 | 150 | 9,221,908 | $ | 75 | $ | 325,991 | $ | (302,455 | ) | $ | 23,611 |
Shares | ||||||||||||||||||||||||
Preferred | Preferred | Common | Accumulated | |||||||||||||||||||||
Series G | Common | Stock | Stock | Deficit | Equity | |||||||||||||||||||
Balance, December 31, 2021 | 150 | 5,158,967 | $ | 75 | $ | 326,279 | $ | (307,859 | ) | $ | 18,495 | |||||||||||||
Common stock awards under equity incentive plans | - | 22,475 | - | 241 | - | 241 | ||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 5 | - | 5 | ||||||||||||||||||
Net loss | - | - | - | - | (1,516 | ) | (1,516 | ) | ||||||||||||||||
Balance, March 31, 2022 | 150 | 5,182,042 | 75 | 326,525 | (309,375 | ) | 17,225 | |||||||||||||||||
Common stock awards under equity incentive plans | - | 48,388 | - | 146 | - | 146 | ||||||||||||||||||
Common stock issued to vendor | - | 600 | - | 1 | - | 1 | ||||||||||||||||||
Net loss | - | - | - | - | (2,621 | ) | (2,621 | ) | ||||||||||||||||
Balance, June 30, 2022 | 150 | 5,231,030 | $ | 75 | $ | 326,672 | $ | (311,996 | ) | $ | 14,751 |
Share-based compensation by type of award, follows (in thousands).
Three Months Ended | ||||||||||||
September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||
Stock options | $ | 28 | $ | 21 | $ | 29 | ||||||
Restricted stock units | 464 | 125 | 212 | |||||||||
Compensation expense related to common stock awards issued under equity incentive plan | $ | 492 | $ | 146 | $ | 241 |
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Options
In the three months ended September 30, 2022, holders forfeited options for the purchase of up to 2,901 shares of common stock (average $19.30 per share exercise price, average 6.9 years remaining life). In the three months ended June 30, 2022, holders forfeited options for the purchase of up to 4,455 shares of common stock (average $21.42 per share exercise price, average 6.8 years remaining life). In the three months ended March 31, 2022, holders forfeited options for the purchase of up to 970 shares of common stock (average $18.48 per share exercise price, average 7.7 years remaining life).
Stock Units
Three Months Ended | ||||||||
June 30, 2023 | March 31, 2023 | |||||||
Stock options | $ | - | $ | 27 | ||||
Restricted stock units | (12 | ) | 273 | |||||
Compensation expense (expense reversal) related to common stock awards issued under equity incentive plans | $ | (12 | ) | $ | 300 |
We have outstanding (i) restricted stock units (RSUs) issued under theour 2014 Equity Incentive Plan (RSUs) to employees and directors and (ii) other restricted stock units (SUs) issued toheld by a service provider.provider (SUs). Each RSU and SU represents a contingent right to receive one share of common stock. Summaries of nonvested and vested restricted stock unit and activity follow.
Restricted Stock Units (Issued under 2014 Plan) | Stock Units Issued to Vendors | |||||||||||||||||||||||
Number of Units | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | Number of Units | Unrecognized Stock Compensation (in thousands) | Weighted Average Expense Period (Years) | |||||||||||||||||||
Nonvested at December 31, 2021 | 126,603 | $ | (658 | ) | 0.9 | - | $ | - | - | |||||||||||||||
Granted | 37,000 | (153 | ) | 2.0 | - | - | - | |||||||||||||||||
Forfeited | (1,000 | ) | 7 | 0.7 | - | - | - | |||||||||||||||||
Vested with service | (22,475 | ) | - | - | - | - | - | |||||||||||||||||
Expensed | - | 212 | - | - | - | - | ||||||||||||||||||
Nonvested at March 31, 2022 | 140,128 | (592 | ) | 0.9 | - | - | - | |||||||||||||||||
Impact of Modification: | - | - | - | |||||||||||||||||||||
Before modification | (11,468 | ) | 125 | - | - | - | - | |||||||||||||||||
After modification | 11,468 | (60 | ) | - | - | - | - | |||||||||||||||||
Forfeited | (9,454 | ) | 55 | - | - | - | - | |||||||||||||||||
Vested with Service | (34,404 | ) | - | - | - | - | - | |||||||||||||||||
Expensed | - | 125 | - | - | - | - | ||||||||||||||||||
Nonvested at June 30, 2022 | 96,270 | (347 | ) | 0.9 | - | - | - | |||||||||||||||||
Granted | 402,276 | (1,458 | ) | 2.8 | 38,968 | (65 | ) | 3.0 | ||||||||||||||||
Vested with Service | (63,607 | ) | - | - | - | - | - | |||||||||||||||||
Expensed | - | 464 | - | - | - | - | ||||||||||||||||||
Nonvested at September 30, 2022 | 434,939 | $ | (1,341 | ) | 2.5 | 38,968 | $ | (65 | ) | 3.0 |
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
RSUs | SUs | |||||||||||||||||||||||||||||||
Number of Units | Unrecognized Compensation (in thousands) | Average Grant Date Fair Value per share | Weighted Average Expense Period (Years) | Number of Units | Unrecognized Compensation (in thousands) | Average Grant Date Fair Value per share | Weighted Average Expense Period (Years) | |||||||||||||||||||||||||
Nonvested at December 31, 2022 | 366,818 | $ | 1,024 | $ | 2.79 | 2.8 | 160,000 | $ | 201 | $ | 1.26 | $ | 3 | |||||||||||||||||||
Granted | 76,088 | 70 | 0.93 | - | 6,132 | 5 | 0.75 | - | ||||||||||||||||||||||||
Forfeited | (646 | ) | (3 | ) | 5.15 | 0.6 | - | - | - | - | ||||||||||||||||||||||
Vested with service | (164,781 | ) | - | - | - | (6,132 | ) | - | - | - | ||||||||||||||||||||||
Expense | - | (274 | ) | - | - | - | (24 | ) | - | - | ||||||||||||||||||||||
Nonvested at March 31, 2023 | 277,479 | 817 | 2.95 | 2.6 | 160,000 | 182 | 1.14 | 2.5 | ||||||||||||||||||||||||
Granted | 60,196 | 60 | 1.00 | - | - | - | - | - | ||||||||||||||||||||||||
Forfeited | (231,413 | ) | (881 | ) | 3.81 | 1.3 | - | - | - | - | ||||||||||||||||||||||
Vested with service | (60,196 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||
Vested upon involuntary termination | (16,750 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||
Expense reversal (expense) | - | 12 | - | - | - | (19 | ) | - | - | |||||||||||||||||||||||
Nonvested at June 30, 2023 | 29,316 | $ | 8 | $ | 0.29 | 0.1 | 160,000 | $ | 163 | $ | 1.02 | 2.2 |
Number of RSUs | ||||
Vested at December 31, | ||||
Vested with service | ||||
Issued at vesting | ( | ) | ||
Vested at March 31, | ||||
Vested with service | ||||
Vested upon involuntary termination | 16,750 | |||
Issued at | ( | ) | ||
Vested at | ||||
| ||||
|
As of SeptemberJune 30, 2022,2023, issuance of 136,130202,333 shares of common stock subject to thecertain RSUs, 176,017 of which are vested, RSUs is deferred to the date the holder is no longer providing service to our company.
Under the original terms of certain RSUs outstanding during the periods presented, the nonvested portion of an RSU is vested upon the without-cause involuntary termination of the holder’s service. Under the original terms of all RSUs outstanding during the periods presented, upon voluntary or with-cause termination of the holder’s service, the nonvested portion of an RSU is forfeited and any previously recognized compensation related to the nonvested portion of an RSU is reversed because our policy is to recognize forfeitures as they occur.
In the three months ended September 30, 2022,July 2023, we issued an option for the following under the 2014 Plan:purchase of up to 100,000 shares of our common stock at an exercise price of $1.05 per share. The option was immediately vested and had a grant date fair value of $73 thousand.
Preferred Stock and Tax Benefits Preservation Plan (Rights Agreement) In July 2023, in connection with the Rights Agreement described below, we designated an eighth series of preferred stock, Series H Junior Participating Preferred Stock, no par value (Series H Preferred Shares). Series H Preferred shares will be entitled, if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share or (ii) an amount equal to 1,000 times the dividend declared per share of our common stock. Each share of Series H Preferred Stock entitles the holder to 1,000 votes on all matters submitted to a vote of our shareholders. In the event of any merger, consolidation or other transaction in which shares of common stock are converted or exchanged, each share of Series H Preferred Stock will be entitled to receive 1,000 times the amount received per one share of our common stock. In July 2023, we entered into the Rights Agreement designed to reduce the likelihood that we will experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended, by (i) discouraging any person or group of persons from becoming an “Acquiring Person”, which is defined in the Rights Agreement generally as a person or group of affiliated or associated persons that, at any time after the date of the Rights Agreement, has acquired, or obtained the right to acquire, beneficial ownership of 4.95% or more of the shares of our then-outstanding common stock and (ii) discouraging any existing shareholder currently beneficially holding 4.95% or more of the shares of our common stock from acquiring more shares of our common stock. In connection therewith, the Board declared a dividend of one preferred share purchase right (a Right) for each outstanding share of common stock to shareholders of record at the close of business on July 17, 2023. Each Right entitles the holder to purchase one one-thousandth of a share of our Series H Preferred Stock at a price of $6.00, subject to certain adjustments. The Rights will separate and begin trading separately from our common stock generally (i) when a person or group of affiliated or associated persons has become an Acquiring Person or (ii) following the commencement, or announcement of an intention to commence, a tender offer or exchange offer the consummation of which would result in any person becoming an Acquiring Person. If issued, each Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become void) will become exercisable for common stock having a value equal to two times the exercise price of the Right. Prior to exercise, a Right does not give its holder any dividend, voting or liquidation rights. If not otherwise redeemed, exchanged or terminated, the Rights will expire in July 2026, or at such later date as may be established by the Board. |
|
|
|
|
|
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
|
|
We issued 38,968 SUs to a service provider in September 2022 and an additional 121,032 SUs in November 2022, which the service provider elected to purchase with a $0.2 million cash signing fee. The SUs vest in three annual installments ending in September 2025, and we are expensing the fair value of the SUs over three years. The service provider may also earn performance-based cash compensation beginning October 1, 2022, if certain performance criteria are met. The performance compensation will be paid quarterly in an amount of cash which may then be used to purchase, at the election of the service provider, a number of fully vested SUs equal to (a) the performance compensation, divided by (b) the volume weighted average closing price of our common stock over the 90 consecutive trading days ending on the last day of the applicable performance period. The aggregate number of SUs purchased by the service provider, including the initial 38,968 units and 121,032 units may not exceed 1,000,000.
In April 2022, we modified 11,468 RSUs held by resigning directors such that the awards vested on the date of their termination of service. Prior to the modification, the resigning directors would have forfeited the unvested RSUs on the date of the resignations. As a result of the modifications, we adjusted cumulative expense on the RSUs to equal the fair value of the awards on the date of the April 28, 2022, modification ($5.20 per unit), in accordance with applicable accounting guidance.
In the three months ended June 30, 2022, we issued a total of 48,386 shares of common stock pursuant to the terms of vested RSUs, which included the 11,468 modified RSUs discussed in the preceding paragraph. Issuance of the shares of common stock subject to these RSUs was deferred to the date the holder was no longer providing service to our company. In the three months ended March 31, 2022, we issued a total of 22,475 shares of common stock upon the vesting of RSUs.
Warrants
In the three months ended September 30, 2022, warrants for the purchase of up to 25,000 shares of common stock ($9.60 per share exercise price) expired and as further discussed in Note 12, the exercise price of an outstanding liability warrant (Warrant A) for the purchase of up to 230,769 shares adjusted to $2.72 per share from $10.00 per share. In the three months ended March 31, 2022, warrants for the purchase of up to 614,298 shares of common stock ($9.60 per share exercise price) expired.
Subsequent Offering
In October 2022, we issued and sold 675,000 shares of our common stock for $1.50 per share and prefunded warrants (the Prefunded Warrants) exercisable into 325,000 shares of our common stock for $1.4999 per warrant, in a registered direct offering. The Prefunded Warrants had an exercise price of $0.0001 per share and were exercised in full after the offering. In a concurrent private placement, we issued and sold warrants for the purchase up to 2,000,000 shares of our common stock at an exercise price of $1.60 per share, which are exercisable April 20, 2023, and expire October 20, 2025. The net proceeds from the offering totaled $1.2 million, after deducting placement agent fees and other cash offering expenses of $0.3 million. We determined the exercise price of the Prefunded Warrants was nominal and, as such, we will consider the shares underlying those warrants to be outstanding effective October 20, 2022, for the purposes of calculating basic EPS. We intend to use the net proceeds from the offering for general corporate purposes, which may include funding capital expenditures, working capital and repaying indebtedness.
In addition, we issued warrants for the purchase of up to 63,000 shares of our common stock to the placement agent at an exercise price of $1.875 per share, which expire October 20, 2027.
NOTE 10.11. INCOME TAXES
Our tax expense for the three months and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, differs from the tax expense computed by applying the U.S. statutory tax rate to net loss from continuing operations before income taxes as no tax benefits were recorded for tax losses generated in the U.S. As of SeptemberJune 30, 2022,2023, we had deferred tax assets primarily related to U.S. federal and state tax loss carryforwards. We provided a full valuation allowance against our deferred tax assets as future realization of such assets is not more likely than not to occur.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 11.12. LOSS PER SHARE (EPS)
We calculate basic EPS under the two-class method under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. Our outstanding convertible preferred stock are considered participating securities as the holders may participate in undistributed earnings with holders of common shares and are not obligated to share in our net losses.
We calculate diluted EPS by dividing the net income attributable to RiceBran Technologies common shareholdersour loss from continuing operations by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the impact of assumed exercises and conversions is dilutive. We calculate the dilutive effects of outstanding options, warrants and nonvested restricted stock units that vest solely on the basis of a service condition are calculated using the treasury stock method. We calculate the dilutive effects of the outstanding preferred stock using the if-converted method.
Reconciliations of the numerators and denominators in the EPS computations for continuing operations follow.
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||
NUMERATOR (in thousands): | ||||||||||||||||||||||||||||||||
Numerator for basic and diluted EPS - net loss | $ | (2,042 | ) | $ | (2,213 | ) | $ | (6,179 | ) | $ | (3,545 | ) | ||||||||||||||||||||
Basic and diluted - loss from continuing operations | $ | (1,836 | ) | $ | (2,174 | ) | $ | (3,350 | ) | $ | (3,889 | ) | ||||||||||||||||||||
DENOMINATOR: | ||||||||||||||||||||||||||||||||
Weighted average number of shares of shares of common stock outstanding | 5,235,005 | 4,662,004 | 5,203,504 | 4,575,587 | 6,438,331 | 5,208,264 | 6,387,961 | 5,187,493 | ||||||||||||||||||||||||
Weighted average number of shares of common stock underlying vested RSUs | 97,303 | 83,680 | 87,276 | 56,293 | ||||||||||||||||||||||||||||
Denominator for basic and diluted EPS - weighted average number of shares outstanding | 5,332,308 | 4,745,684 | 5,290,780 | 4,631,880 | ||||||||||||||||||||||||||||
Weighted average number of shares of common stock underlying vested RSUs and SUs | 284,607 | 77,900 | 257,925 | 82,179 | ||||||||||||||||||||||||||||
Basic and diluted EPS - weighted average number of shares outstanding | 6,722,938 | 5,286,164 | 6,645,886 | 5,269,672 |
No effects of potentially dilutive securities outstanding were included in the calculation of diluted EPS for continuing operations for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, because to do so would be antidilutive as a resultbecause of our net loss.loss from continuing operations. Potentially dilutive securities outstanding during theat three and nine months ended SeptemberJune 30, 20222023, and 2021,included our outstanding convertible preferred stock, options, warrants, nonvested RSUs and nonvested stock units.SUs.
NOTE 12.13. FAIR VALUE MEASUREMENTS
The fair value of cash and cash equivalents, accounts and other receivables,receivable, accounts payable. commodities payable and commodities payableshort-term debt approximates their carrying value due to shorter maturities. As of SeptemberJune 30, 2022,2023, the fair values of our operating lease liabilities were approximately $0.5 million lower than their carrying values, based on current market rates for similar debt and leases with similar maturities (Level 3 measurements). As of September 30, 2022, the fair values of ourliability, 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).
The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our consolidated balance sheets (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Total liabilities at fair value as of September 30, 2022 - Derivative warrant liability | $ | - | $ | - | $ | 234 | $ | 234 | ||||||||
Total liabilities at fair value as of December 31, 2021 - Derivative warrant liability | $ | - | $ | - | $ | 258 | $ | 258 | ||||||||
Total liabilities at fair value as of September 30, 2021 - Derivative warrant liability | $ | - | $ | - | $ | 647 | $ | 647 |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Total liabilities at fair value as of June 30, 2023 - Derivative warrant liability | $ | - | $ | - | $ | 108 | $ | 108 | ||||||||
Total liabilities at fair value as of December 31, 2022 - Derivative warrant liability | $ | - | $ | - | $ | 69 | $ | 69 |
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
The following tables summarize the changes in level 3 items measured at fair value on a recurring basis for the three and ninesix months ended SeptemberJune 30, 2022 2023, (and 2021 (inin thousands):
Fair Value as of Beginning of Period | Total and Unrealized | Issuance of New Instruments | Net of | Fair Value, at End of Period | Change in Unrealized Gains (Losses) on Instruments Still Held | Fair Value as of Beginning of Period | Total and Unrealized | Issuance of New Instruments | Net of | Fair Value, at End of Period | Change in Unrealized Gains (Losses) on Instruments Still Held | |||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total Level 3 fair value - Derivative warrant liability | $ | 846 | $ | 612 | $ | - | $ | - | $ | 234 | $ | 612 | $ | 97 | $ | (11 | ) | $ | - | $ | - | $ | 108 | $ | (11 | ) | ||||||||||||||||||||||
Nine months ended September 30, 2022: | ||||||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, 2023: | ||||||||||||||||||||||||||||||||||||||||||||||||
Total Level 3 fair value - Derivative warrant liability | $ | 258 | $ | 24 | $ | - | $ | - | $ | 234 | $ | 24 | $ | 69 | $ | (39 | ) | $ | - | $ | - | $ | 108 | $ | (39 | ) | ||||||||||||||||||||||
Three and nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total Level 3 fair value - Derivative warrant liability | $ | - | $ | - | $ | 647 | $ | - | $ | 647 | $ | - | $ | 429 | $ | (417 | ) | $ | - | $ | - | $ | 846 | $ | (417 | ) | ||||||||||||||||||||||
Six months ended June 30, 2022: | ||||||||||||||||||||||||||||||||||||||||||||||||
Total Level 3 fair value - Derivative warrant liability | $ | 258 | $ | (588 | ) | $ | - | $ | - | $ | 846 | $ | (588 | ) |
The derivative warrant liability relates to a warrant issued in September 2021 for the purchase of up to 230,769 shares of common stock (Warrant A)., The current $2.72 per share exercise price of Warrant A is subject to adjustment in September 2023 to 110% of the 5-day volume weighted average price of our common stock if that price is less than the than $2.72 per share. The initial $10.00 per share exercise price of Warrant A adjusted in September 2022 to $2.72 per share. We classify Warrant A in our consolidated balance sheets as derivative warrant liability because the holder may elect cash settlement of this warrant in the event of a change of control. We estimated the fair value of Warrant A as of SeptemberJune 30, 2023, and December 31, 2022, using the Black-Scholes value of a warrant with an exercise price of $2.72 per share. We estimated the fair value of Warrant A as of and December 31, 2021, using the Black-Scholes value of a warrant with an exercise price of $10.00 per share. The changes in the estimated fair value of Warrant A are included in other income (loss) in our consolidated statements of operations. The assumptions used in valuing Warrant A follow.
September 30, 2022 | December 31, 2021 | June 30, 2023 | December 31, 2022 | |||||||||||||
Assumed exercise price | $ | 2.72 | $ | 2.72 | ||||||||||||
Assumed volatility | 88.3 | % | 69.5 | % | 91.1 | % | 92.2 | % | ||||||||
Assumed risk free interest rate | 3.2 | % | 0.8 | % | 3.8 | % | 4.3 | % | ||||||||
Expected life of options (in years) | 4.0 | 4.8 | 3.2 | 3.7 | ||||||||||||
Expected dividends | - | - | - | - |
The fair value of Warrant A approximates the cash settlement the holder could elect to be paid in the event of a change inof control. At SeptemberJune 30, 2022,2023, an $0.18 (approximate 10%) increase in our stock price would have resulted in an approximate $32 thousand increase inif we had estimated the Black Scholes fair value of Warrant A.A using our stock price as of June 30, 2023, the fair value of Warrant A would have been less than $0.1 million higher.
NOTE 13.14. COMMITMENTS AND CONTINGENCIES
PPP Audit Contingency
In April 2020, we received $1.8 million on a Small Business Administration (SBA) Payroll Protection Program (PPP) loan as provided for in the Coronavirus Aid, Relief and Economic Security Act, enacted into U.S. law in March 2020. Under certain conditions, the loan and accrued interest were forgivable, if we used the loan proceeds for maintaining workforce levels. We used the loan proceeds for maintaining workforce levels and the SBA forgave the entire loan, and related accrued interest in January 2021. The SBA may audit any PPP loan at its discretion through January 2027, six years after the date the SBA forgave the loan. The SBA may review any or all of the following when auditing a PPP loan: whether the borrower qualified for the PPP loan, whether the PPP loan amount was appropriately calculated and the proceeds used for allowable purposes, and whether the loan forgiveness amount was appropriately determined. The SBA could deem us ineligible for the PPP loan received in 2020 upon audit by the SBA. We believe the SBA’s stated intention is to focus its reviews on borrowers with loans greater than $2 million, thereby mitigating our future risk of an audit. The SBA continues to develop and issue new and updated guidance regarding required borrower certifications and requirements for forgiveness of loans made under the program.
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Employment Contracts and Severance Payments
In the normal course of business, we periodically enter into employment agreements which incorporate indemnification provisions. While the maximum amount to which we may be exposed under such agreements cannot be reasonably estimated, we maintain insurance coverage, which we believe will effectively mitigate our obligations under these indemnification provisions. No amounts have been recorded in our financial statements with respect to any obligations under such agreements.
We have employment contracts with certain officers and key management that include provisions for potential severance payments in the event
RiceBran Technologies
Notes to Unaudited Condensed Consolidated Financial Statements
Vesting of certain circumstances after a change in control. In addition, vesting of outstanding nonvested equity grants would accelerate following a change in control.
Legal Matters
From time to time, we are involved in litigation incidental to the conduct of our business. These matters may relate to employment and labor claims, patent and intellectual property claims, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position or results of operations. We expense defense as incurred. Defense costs, when incurred, are included in selling, general and administrative expense.expenses.
In January 2023, we received $0.3 million in restitution payments from a former employee. The payments were ordered by a federal court in 2012. Other income in the six months ended June 30, 2023, includes a $0.3 million gain as a result of collecting the restitution payment.
NOTE 14.15. FAILURE TO COMPLY WITH NASDAQ LISTING REQUIREMENTSSTOCK MARKET LLC (NASDAQ) NOTICES
On September 15, 2021,July 10, 2023, we received a notification letter from The Nasdaq Stock Market LLC (Nasdaq) indicatingnotified us that we are not in compliance with Nasdaq’s audit committee composition requirements which require that our Board’s audit committee be comprised of at least three independent directors, as defined in Nasdaq Listing Rule 5605(a)(2). Our audit committee is currently comprised of two independent directors and one vacancy. Pursuant to Nasdaq Listing Rule 5605(c)(4), we have faileduntil (i) the earlier of our next annual meeting of stockholders or June 12, 2024; or (ii) December 11, 2023, if the next annual meeting of stockholders is held before December 11, 2023. We intend to comply fully with Nasdaq’s audit committee composition requirements by or before the end of the cure period described above.
On June 13, 2023, Nasdaq notified us that we are not in compliance with Nasdaq’s minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) which requires that companies listed on the Nasdaq Capital Marketus to maintain a minimum bid price of $1.00.1.00 per share. To regain compliance with this listing rule, the closing bid price of our common stock hadhas to be at least $1.00 per share for a period of Nasdaq’s discretion, of at least 10, but not to exceed 20, consecutive business days. OnWe have until September 12, 2022,December 11, 2023, Nasdaq notified us thatto regain compliance under Nasdaq’s Listing Rules. As of the date of this filing, we hadhave not regained compliance with the minimum bid price requirementrequirement. We may be eligible for and obtain from Nasdaq an additional compliance period. We are committed to taking actions that would enable us to regain compliance, including, if necessary, completing a reverse split of our common stock to increase the matter was closed.per share price of our common stock.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ResultsOn June 23, 2023, we completed the sale of Operations - Three Months Ended September 30, 2022, Compared to Three Months Ended September 30, 2021
Revenues of $10.3 million in the third quarter of 2022 increased $3.3 million, or 48.3%, comparedassets related to the third quarterproduction of 2021. This year-over-year increase was due to higher core-SRB sales and strong growth from our MGI and Golden Ridge milling operations.
Gross loss was $0.7 million in the third quarter of 2022, a $0.4 million increase in gross loss compared to the third quarter of 2021. The increase in gross loss was attributable to lower sales and cost overruns for our value-added SRB derivatives business and higher gross losses at our Golden Ridge milling operation versus a year ago, offset in part by improved profitability from our core-SRB business and MGI milling operation.
Selling, general and administrative (SG&A) expenses were $1.8 million in the third quarter of 2022stabilized rice bran and the third quarterprocessing of 2021 as reductionsstabilized rice bran into stabilized rice bran derivatives at facilities located in corporate support headcount and outside professional services were offset in part by higher wage rates and higher contract employee expense, as well as a double-digit increase in insurance premiums.
Due to the increase in gross losses, operating losses were $2.5 million in the third quarter of 2022, up from $2.1 million in the third quarter of 2021. In the third quarter of 2022, we recognized a $0.6 million gain for the change in the fair value of a warrant liability. As a result of higher operating losses being offset by this gain, net loss in the third quarter of 2022 was $2.0 million, or $0.38 per share, compared to a net loss of $2.2 million, or $0.47 per share, in the third quarter of 2021.
Results of Operations – Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021
Revenues of $31.0 million in the first nine months of 2022 increased $8.0 million, or 34.7%, compared to the nine months of 2021. This year-over-year increase was due to higher core-SRB sales and strong growth from our MGI and Golden Ridge milling operations, offset in part by lower value-added SRB derivative product revenues due to production issues in the second quarter of 2022.
The $1.2 million decrease in gross profit in the first nine months of 2022, compared to the first nine months of 2021, was primarily attributable to lower gross profits from our value-added SRB derivative products and a modest increase in gross losses from Golden Ridge, offset in part by a modest increase in gross profits for our core-SRB business and MGI.
SG&A expenses of $5.2 million in the first nine months of 2022 decreased $0.3 million, or 5.7%, compared to the first nine months of 2021, as reductions in corporate support headcount and outside professional services were offset in part by higher wage rates and insurance premiums.
We recognized a gain on the involuntary conversion of assets of $0.1 million in the first nine months of 2022, when we finalized our insurance claim for hurricane damage that occurred in August 2020 to ourWest Sacramento, California, Mermentau, Louisiana, Lake Charles, Louisiana property.
Operating losses were $5.7 millionand Dillon, Montana (the SRB Business). The SRB Business’s results are presented as discontinued operations in the first nine monthsour consolidated statements of 2022, upoperations and are excluded from $5.0 millioncontinuing operations for all periods presented. See Note 3 in the first nine months of 2021, due to lower gross profits. In January 2021, we recognized a $1.8 million gain on extinguishment of our Small Business Administration (SBA) Paycheck Protection Program (PPP) loan (see Note 13 of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of our discontinued operations.
Our continuing operations include the loan)results of operating our rice mill located in Wynne, Arkansas (Golden Ridge) and our barley and oats mill located in East Grand Forks, Minnesota (MGI).
Results of Continuing Operations – Three Months Ended June 30, 2023 and 2022
Revenues of $6.3 million in the second quarter of 2023 decreased $0.3 million, or 4.7%, from $6.6 million in the second quarter of 2022. A $0.4 million decrease in MGI milling revenues was offset by a $0.8 million increase in Golden Ridge milling revenues. MGI revenues declined due to lower commodity prices. Golden Ridge revenues increased mainly because of higher commodity prices.
Our second quarter 2023 gross profit of $24 thousand compares to a gross loss of $0.4 million in the second quarter of 2022. Both MGI’s and Golden Ridge’s gross profit (loss) improved between quarters. MGI’s gross profit improved due to the elimination of certain operating inefficiencies in 2022. Golden Ridge’s gross loss lowered because of increased volume.
Selling, general and administrative (SG&A) expenses of $1.6 million in the second quarter of 2023 increased $0.4 million from $1.2 million in the second quarter of 2022. The increase primarily relates to increased legal costs incurred in the second quarter of 2023 as we continue to explore strategic alternatives.
Loss from continuing operations before other income (expense) was $1.6 million in the second quarter of 2023, consistent with the second quarter of 2022, because the impact of improved gross margins was offset by increased SG&A expenses.
Other income (expense), net, decreased $0.3 million in the second quarter of 2023 compared to the second quarter of 2022. A $0.4 million reduction in the loss from the change in the fair value of our derivative warrant liability was offset by higher interest and other borrowing costs.
As a result of higher operating losses, lower SG&A, the impact of the gain on involuntary conversion of assets and the nonrecurring gain on the extinguishment of debt in the first nine months of 2021, netabove, our second quarter 2023 loss in the first nine months of 2022from continuing operations was $6.2$1.8 million, or $1.17$0.27 per share, compared to $2.2 million, or $0.41 per share, in the second quarter of 2022.
Results of Continuing Operations – Six Months Ended June 30, 2023 and 2022
Primarily due to the same commodity input pricing changes noted above for the three months ended June 30, 2023, revenues of $12.1 million in the first half of 2023 decreased $0.5 million, or 3.7%, from $12.6 million in the first half of 2022. This decrease included a net$1.4 million decrease in MGI revenues, offset by a $0.9 million increase in Golden Ridge revenues.
Similarly, our gross loss of $3.5$34 thousand in the first half of 2023 improved from a gross loss of $0.4 million in the first half of 2022. MGI’s gross profit improved due to the elimination of certain operating inefficiencies in 2022. Golden Ridge’s gross loss lowered because of increased volume.
SG&A expenses of $3.1 million in the first half of 2023 increased $0.5 million compared to $2.6 million in the first half 2022. The increase primarily relates to increased legal costs incurred in the second quarter of 2023 as we continue to explore strategic alternatives.
Loss from continuing operations before other income (expense) was $3.1 million in the first half of 2023, compared to $3.0 million in the first half of 2022, because the impact of improved gross margins was more than offset by increased SG&A expenses.
Other income (expense), net, decreased $0.5 million from the first half of 2022 compared to the first half of 2023.The favorable impacts of a $0.3 million restitution payment from a former employee, which had been ordered by a federal court in 2012, and a $0.5 million reduction in the change in the fair value of our derivative warrant liability were offset by higher interest and other borrowing costs.
As a result of the above our loss from continuing operations in the first half of 2023 was $3.4 million, or $0.38$0.50 per share, compared to $3.9 million, or $0.74 per share, in the first nine monthshalf of 2021.2022.
Liquidity, Going Concern and Capital Resources
We had $4.4$0.3 million in cash and equivalents as of SeptemberJune 30, 2022,2023, a decreasedecline of $1.5$0.6 million from $5.8December 31, 2022, after considering repayments of $3.0 million on December 31, 2021. Duringour factoring, line of credit, long term debt and finance lease liabilities. In our continuing operations, during the first nine monthshalf of 2022,2023, we were ableused $1.3 million of cash to fund operations and $0.3 million to fund capital expenditures. This was offset higher operating losses with increased borrowing.
Cash used in operating activitiesby $1.0 million of net cash provided by the operation and disposition of our SRB Business in the first nine monthshalf of 2022 was $3.9 million, up from $2.0 million in the first nine months of 2021, driven principally by higher net losses. Cash used in investing activities in the 2022 period consisted of $0.4 million in capital expenditures, primarily for the purchase and installation of capital equipment at our MGI facility offset by $0.1 million in insurance proceeds. Cash from financing activities in the 2022 period was $2.7 million, which included the $1.8 million net borrowings on a line of credit and a $0.9 million over-advance on our factoring facility (see Note 82023.
The buyer of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussionSRB business did not acquire accounts receivable generated by the operation of the over-advance).SRB Business assets and generally did not assume any accounts payable or accrued expenses related to the operation of the SRB Business through the June 23, 2023, date of sale. We continue to manage collections of those accounts receivable and payments of those liabilities.
Management believes that despite the multi-year history of operating losses and negative operating cash flows from continuing operations, there is no substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements included in this Quarterly Report are issued. Factors alleviating this concern include $4.4 millionthe expected continuing improvement in cash and cash equivalents asprofitability of September 30, 2022,our milling operations and our ability to procure additional capital if needed through a variety of sources. Mostsources, most notably subsequent tothrough the end of the third quarter of 2022, we were able to raise approximately $1.2 million, net of costs, through a direct placement ofdisposition, or borrowing against, our common stock, and common stock equivalents, and in late September 2022, we received a $0.9 million over-advance on our factoring facility, pending a restructuring of our mortgage promissory note secured by our real property in Wynne, Arkansas.owned facilities.
On March 30, 2020, we entered into a sales agreement with respect to an at-the-market (ATM) offering program, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $6.0 million, which we currently have $2.8 million remaining. Under the terms of the securities purchase agreement related to thea September 2021 offering, we are prohibited from entering into an agreement to effect any at-the-market issuance until September 13, 2023. Under the terms of the securities purchase agreement related to the October 2022 offerings, we are generally prohibited from entering into a variable rate transaction, as defined in the agreement, until October 20, 2023.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the financial statements. On an ongoing basis, we evaluate the estimates, including, but not limited to, those related to revenue recognition, inventory valuation, and long-lived asset impairment. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates.
Recent Accounting Pronouncements
See Note 34 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the Exchange Act) and are not required to provide the information otherwise required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures. As of SeptemberJune 30, 2022,2023, there have been no significant changes to our critical accounting policies and related estimates previously disclosed in our 20212022 Annual Report on Form 10-K.
We evaluated, with the participation of our executive chairman, and interim chief financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our executive chairman and interim chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K and below are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.
An “ownership change” could limit our ability to utilize our net operating loss (NOL) carryforwards and other tax attributes, which could result in increased future tax liability to us. We have entered into a rights agreement (Rights Agreement) to reduce the likelihood of an “ownership change” occurring in the future.
We have significant U.S. federal and state NOL carryforwards. Federal tax laws impose restrictions on the utilization of NOL carryforwards and other tax attributes in the event of an “ownership change” as defined by Section 382 of the Internal Revenue Code of 1986, as amended (Tax Code). A corporation generally will experience an “ownership change” if the percentage of the corporation’s stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code (Section 382), increases by more than 50 percentage points over their lowest ownership percentage within the “testing period” as defined in Section 382, which is generally a rolling three-year period. Under Section 382, if a corporation undergoes an “ownership change,” such corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change.” If an “ownership change” occurs in the future, utilization of our NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to us.
Accordingly, we have adopted the Rights Agreement. The Rights Agreement is designed to reduce the likelihood that we will experience an “ownership change” under Section 382 by discouraging any person or group of persons from acquiring beneficial ownership of 4.95% or more of the shares of our common stock then outstanding or from acquiring additional shares of our common stock. Although the Rights Agreement is intended to reduce the likelihood of an “ownership change” that could adversely affect the utilization of our NOL carryforwards and other tax attributes, we cannot provide assurance that these restrictions on transferability will prevent all transfers that could result in such an “ownership change.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended SeptemberJune 30, 2022,2023, we issued the securities described below without registration under the Securities Act.Act of 1933, as amended. The description below does not include issuances that we disclosed previously on Current Reports on Form 8-K. Unless otherwise indicated below, the securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act). Weamended. All issuances below were made the issuance below without any public solicitation, to a limited number of sophisticated persons and were acquired for investment purposes only.
On SeptemberJune 30, 2022,2023, we issued 600 shares of common stock to a service provider, whichthat is not a natural person, as compensation for service provided. The shares were valued at an aggregate of $2,100.$444.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 3.02 Unregistered Sales of Equity SecuritiesNone
On November 1, 2022, we amended the terms of our engagement of Gander Foods, LLC, a New Jersey limited liability company (the Operator), to perform services in connection with our rice milling operations and those of Golden Ridge Rice Mills, Inc., our wholly owned subsidiary. The engagement was described in our Current Report on Form 8-K filed on September 29, 2022 (the Original 8-K).
As amended, the Operator’s initial cash compensation of $200,000 (the Initial Compensation) will be used by the Operator to purchase an aggregate of 160,000 (rather than 38,968) unvested restricted stock units (SUs), each representing the contingent right to receive one share of our common stock. All other terms of the engagement remain the same and are unchanged, and the total amount of SUs that may be purchased by the Operator with the Initial Compensation or the Performance Compensation (as defined in the Original 8-K) may still not exceed 1,000,000.
The SUs are being offered and sold in a private placement to an eligible investor pursuant to Section 4(a)(2) of the Securities Act. The SUs and underlying shares of our common stock have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration under or an applicable exemption from registration under the Securities Act and any applicable state securities laws.Item 6. Exhibits
The following exhibits are attached hereto and filed herewith:
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Description | Form | File No. | Exhibit Number | Filing/Effective Date | Filed Here-with | ||||||
3.1 | 8-K | 001-36245 | 3.1 | August 25, 2022 | ||||||||
31.1 | X | |||||||||||
31.2 | X | |||||||||||
32.1 | X | |||||||||||
101.INS (1) | Inline XBRL Instance Document | X | ||||||||||
101.SCH (1) | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||
101.CAL (1) | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||
101.DEF (1) | Inline XBRL Taxonomy Extension Calculation Definition Linkbase Document | X | ||||||||||
101.LAB (1) | Inline XBRL Taxonomy Extension Calculation Label Linkbase Document | X | ||||||||||
101.PRE (1) | Inline XBRL Taxonomy Extension Calculation Presentation Linkbase Document | X | ||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Incorporated by Reference | ||||||||||||
Exhibit Number | Exhibit Description | Form | File No. | Exhibit Number | Filing/Effective Date | Filed Here- with | ||||||
10.1 | Asset Purchase Agreement with Stabil Nutrition, LLC, dated as of June 23, 2023 | 8-K | 001-36245 | 2.1 | June 28, 2023 | |||||||
10.2 | 8-K | 001-36245 | 10.1 | June 28, 2023 | ||||||||
10.3 | Consulting Services Agreement with CXO Partners dated as of April 6, 2023 | S-1/A | 001-36245 | 10.1 | April 11, 2023 | |||||||
31.1 | X | |||||||||||
31.2 | X | |||||||||||
32.1 | X | |||||||||||
101.INS (1) | Inline XBRL Instance Document | X | ||||||||||
101.SCH (1) | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||
101.CAL (1) | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||
101.DEF (1) | Inline XBRL Taxonomy Extension Calculation Definition Linkbase Document | X | ||||||||||
101.LAB (1) | Inline XBRL Taxonomy Extension Calculation Label Linkbase Document | X | ||||||||||
101.PRE (1) | Inline XBRL Taxonomy Extension Calculation Presentation Linkbase Document | X | ||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
(1) | XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: |
| |
/s/ | ||
| ||
Director and Executive Chairman |
/s/ | ||
| ||
Interim Chief Financial |