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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

 

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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).

 

 

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.

 

 

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.

 

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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	%

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RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

Maturities of lease liabilities as of SeptemberJune 30, 2022,2023, followsfollow (in thousands).

 

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.

 

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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).

 

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.

 

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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
		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

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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

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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, 20212022			86,505224,725
Vested with service			22,475170,913
Issued at vesting			(22,47574,825	)
Vested at March 31, 20222023			86,505320,813
Vested with service			34,40460,196
Vested upon involuntary termination			16,750
Issued at termination of servicevesting			(48,386221,742	)
Vested at June 30, 2022March 31, 2023			72,523
Vested with service			63,607
Vested at September 30, 2022			136,130176,017

 

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.

278,151 RSUs, the issuance of which was subject to shareholder approval of the increase in the shares of common stock authorized for issuance under the 2014 Plan. The RSUs vest over an average of forty-nine months from the July 14, 2022, grant date.

●

65,790 RSUs to our directors which vest on July 14, 2023, or one day prior to the next annual meeting of our shareholders.

●

19,003 RSUs to our directors on July 14, 2022, which were immediately vested, in lieu of paying board fees in cash for the quarter ended June 30, 2022.

 

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RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

 

●

30,279 RSUs to our directors on September 30, 2022, which were immediately vested, in lieu of paying board fees in cash for the quarter ended September 30, 2022.

●

9,053 RSUs to employees. The RSUs vest over an average of 8 months from the date of grant.

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.

 

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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.

 

 

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

 

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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):

 

 

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.

 

 

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.

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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

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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.

 

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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.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

 

Item 1A. Risk Factors

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 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 5. Other Information

 

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

 

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

Certificate of Amendment of Articles of Incorporation as field with the California Secretary of State effective August 25, 2022

8-K

001-36245

3.1

August 25, 2022

31.1

Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2

Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

32.1

Certification by Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

Letter Agreement with Continental Republic Capital, LLC d/b/a Republic Business Credit, dated as of June 23, 2023

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

Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2

Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X

32.1

Certification by Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated:  November 3, 2022August 21, 2023	RiceBran Technologies
	/s/ Peter G. BradleyEric Tompkins
	Peter G. BradleyEric Tompkins
	Director and Executive Chairman

 

	/s/ Todd T. MitchellWilliam J. Keneally
	Todd T. MitchellWilliam J. Keneally
	Interim Chief Financial Officer and Chief Operating Officer