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MarketScreener Homepage  >  Equities  >  Nasdaq  >  RiceBran Technologies    RIBT

RICEBRAN TECHNOLOGIES

(RIBT)
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RICEBRAN TECHNOLOGIES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/05/2020 | 04:49pm EST

Results of Operations

Unless otherwise noted, amounts and percentages for all periods discussed below reflect the results of operations and financial condition from our continuing operations.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Revenues decreased $0.1 million in the third quarter of 2020 to $5.2 million compared to $5.3 million in the third quarter of 2019. The decrease in revenue year-over-year was due to lower revenues at our Golden Ridge Rice Mill (Golden Ridge) operations, which ran well below capacity for most of the third quarter as we were not able to acquire sufficient rough rice to mill at an economical price. Lower revenues from Golden Ridge was partially offset by increases in revenue from both our MGI Grain (MGI) and our RiceBran (RBT) businesses.

We experienced a gross loss of $0.8 million in the third quarter of 2020 compared to a gross loss of $0.4 million in the third quarter of 2019. The increase in gross loss was primarily attributable to Golden Ridge due to higher input commodity prices, $0.5 million in expenses related to the resolution of contract disputes, and the impact of higher downtime during the quarter compared to the same period a year ago. Gross losses were also impacted by negative operating leverage from a shift in product mix versus a year ago.

Selling, general and administrative (SG&A) expenses were $1.9 million in the third quarter of 2020, compared to $3.9 million in the third quarter of 2019, a decrease of $2.0 million. The decline in SG&A expense was primarily related to initiatives to reduce overall SG&A costs, which we began enacting in the first quarter of 2020. SG&A was impacted favorably by the reversal of approximately $0.1 million in previously recognized stock compensation when unvested awards were forfeited, offset by a $0.1 million loss due to hurricane damage to a facility in Louisiana in 2020.

Other net was $0.1 million in the third quarter of 2020 compared to other income, net, of $0.9 million in 2019. In the 2020 period, we incurred higher fees and interest expense related to the increased average outstanding balance of our factoring facility, a new facility entered into in the fourth quarter of 2019, and on our long-term debt borrowings under agreements entered into in 2020, described further in Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements. The 2019 period included $0.8 million gain from a settlement with the sellers of Golden Ridge which was of a nonrecurring nature.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Revenues increased $1.5 million, or 8.4%, in the first nine months of 2020 compared to the first nine months of 2019. The increase in revenue year over year was due to higher revenues from MGI and Golden Ridge, offset by a decline in revenue from our RBT operations. MGI was acquired in April 2019 and, therefore, our revenues included no MGI revenue in the first quarter of 2019.

We experienced a gross loss of $2.4 million in the first nine months of 2020, compared to a gross loss of $0.3 million in the first nine months of 2019. The decline in gross profit was primarily attributable to higher losses from Golden Ridge due to sub-par milling yields, higher input commodity prices, $0.7 million in expenses related to the resolution of contract disputes, and negative operating leverage from higher downtime in the second and third quarters. Gross profits were also negatively impacted by negative operating leverage from our RBT operations, offset in part by a higher gross profit contribution from MGI.

SG&A expenses were $7.0 million in the first nine months of 2020, compared to $10.6 million in the first nine months of 2019, a decrease of $3.6 million. The decline in SG&A expenses was primarily related to initiatives to reduce overall SG&A costs, which we began enacting in the first quarter of 2020, as well as the absence of approximately $0.3 million in costs associated with our acquisition of Golden Ridge, and lower legal and outside accounting fees. These reductions were offset by a $0.1 million loss due to hurricane damage to a facility in in Louisiana and a $0.3 million loss on disposition of assets in 2020.

Other net was $0.3 million in the first nine months of 2020 compared to other income, net, of $0.9 million in the first nine months of 2019. In the 2020 period, we incurred higher fees and interest expense related to the increased average outstanding balance of our factoring facility, a new facility entered in to in the fourth quarter of 2019, and on our long-term debt borrowings under agreements entered into in 2020. The 2019 period included $0.8 million gain from a settlement with the sellers of Golden Ridge which was of a nonrecurring nature.

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COVID-19 Assessment

The United States is experiencing an outbreak of a novel coronavirus (COVID-19), which has been declared a "pandemic" by the World Health Organization.

The COVID-19 pandemic has become a worldwide health crisis that is adversely affecting the economies and financial markets of many countries, which we expect may adversely affect the demand for our products. This pandemic also poses the risk that we or our customers, suppliers and other business partners may be disrupted or prevented from conducting business activities for certain periods of time, the durations of which are uncertain. However, we are not able to estimate the exact magnitude of the impact of such developments on our business. The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and spread of the outbreak within the markets in which we operate, including the related impact on our customers' spending, all of which is highly uncertain.

In April 2020, we applied for, and received, a $1.8 million SBA Paycheck Protection Program loan as discussed further in Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements. We believe the funds from this loan have enabled us to maintain our current workforce in light of potential economic disruptions to our business resulting from the COVID-19 outbreak.

We currently do not expect any of our facilities to be subject to government-mandated closures, and we have informed our customers that, at this time, we anticipate operating throughout the COVID-19 outbreak. The COVID-19 outbreak has not yet caused any material disruption in the supply of raw materials used in our products or in the distribution of our products, and to date, our employees have been reporting to work, either remotely or in-person without any material changes in attendance or productivity due to the COVID-19 outbreak. However, we cannot ensure that the COVID-19 outbreak will not cause disruptions to our business in the future.

Liquidity, Going Concern and Capital Resources

On March 30, 2020, we entered into an at market issuance sales agreement with respect to an at-the-market offering program, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $6.0 million. As further discussed in Note 10 of the Notes to Unaudited Condensed Consolidated Financial Statements, we received net proceeds of $0.7 million under the agreement. As discussed further in Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements, in April 2020, we were approved for a $1.8 million SBA Payroll Protection Program loan (PPP Loan) and in July 2020, we secured a mortgage of up to $2.0 million on our rice mill in Wynne, Arkansas. We received $1.0 million of proceeds under the mortgage in September 2020 and an additional $1.0 million in October 2020.

We used $7.3 million in operating cash during the first nine months of 2020. We used operating cash to increase our inventories by $0.8 million in anticipation of early October product shipments. We experienced a $1.4 million reduction in accounts receivable in the first nine months of 2020 associated with the decrease in revenues at the end of the third quarter of 2020. We paid $1.1 million of capital expenditures in the first nine months of 2020. We expect to fund the rebuilding of our building in Louisiana with proceeds from insurance. We funded our working capital needs in the nine months ended September 30, 2020 primarily with funds received from the sale of receivables under our factoring agreement, supplemented by proceeds from the PPP loan, mortgage note and stock offering.

Management believes that despite the multi-year history of operating losses and negative operating cash flows from our continuing operations, there is no substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. The factors that alleviated this doubt include cash and cash equivalents of $3.9 million as of September 30, 2020, the resumption of operations and the end of payments to settle prior contract disputes at our Golden Ridge facility, positive revenue and margin trends for our RiceBran and MGI operations, a nearly 50% year-over-year reduction in corporate expenses, and the ability to seek addition capital through asset-backed borrowing arrangements and/or asset dispositions.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, other than employee contracts, that have or are likely to have a current or future material effect on our financial condition, changes in financial condition, revenue, expenses, results of operations, liquidity, capital expenditures, or capital resources.

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Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the financial statements. On an ongoing basis, we evaluate the estimates, including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates.

Recent Accounting Pronouncements

See Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.

© Edgar Online, source Glimpses

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