Fred Sommer – Investor Relations W. John Short – Chief Executive Officer and President J. Dale Belt – Chief Financial Officer Mark McKnight – Senior Vice President-Contract Manufacturing and President-H & N Robert Smith – Senior Vice President-Business Development.

Bruce Galloway – Galloway Capital Management, LLC Philip Anderson – Pinnacle Funds.

Good day, ladies and gentlemen and thank you for standing by. Welcome to the RiceBran Technologies Q3 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

[Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce our host, Mr. Fred Sommer, of Ascendant Partners. Please go ahead, Mr. Sommer..

Thank you operator and good afternoon listeners. Welcome to RiceBran Technologies third quarter financial results conference call. With us today are John Short, Chief Executive Officer and President of RiceBran Technologies; Dale Belt, Chief Financial Officer; and Dr.

Robert Smith, Senior Vice President of Operations; Mark McKnight, Senior Vice President of Sales and Marketing. Before I turn the call over to John, I want to remind listeners that during the call, management’s prepared remarks may contain forward-looking statements that are subject to risks and uncertainties.

Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from results discussed today, and therefore we refer you to the detailed discussion of these risks and uncertainties in the company’s filings with the SEC.

In addition, any projections as to the company’s future performance represented by management include estimates today as of November 14, 2014, and the company assumes no obligation to update these projections in the future as market conditions change.

This webcast and certain financial information provided in this call, including reconciliations of historical non-GAAP financial measures to comparable historical GAAP financial measures are available at www.ricebrantech.com on the Investor Relations page.

At this time, I would like to turn the call over to John Short, CEO and president of RiceBran Technologies. John, please go ahead..

Thanks Fred and thanks to all of our listeners for joining today. During the third quarter of 2014, we made an important stride in positioning our company for a continued future growth. We also experienced short-term challenges that impacted our operations in the third quarter and continue to affect us in the fourth quarter.

In our USA segment, the first phase expansion that our Healthy Natural plant in Irving, Texas was completed in July. I am pleased to report that the new equipment has fully installed and running as planned effectively doubling available production capacity.

At our Dillon, Montana Stage 2 plant, we accelerated the original timetable for completion of the expansion project from the first quarter of 2015 to Q4 of 2014. That expansion is nearly complete and will also double production capacity. We expect to have the plant fully operational at a 100% capacity increase before the end of this month.

As you know, our process patented Stage 2 products are ingredients for the finished products produced at Healthy Natural. So we need increased production of Stage 2 products from Dillon to support growth at Healthy Natural.

Additionally, as we’ve previously stated, we’re in planning stages to install cosmetics manufacturing capabilities at Healthy Natural next year. That investment will allow us to capitalize on what we believe as a significant opportunity for a high margin revenue in cosmetics and Nutricosmetics.

While the demand for our products and for the entire NFF category in general continues to expand, operational challenges in both Brazil and California impacted our ability to ramp up production and sales more rapidly. In Brazil, raw bran shortages were experienced throughout the Brazilian winter months.

And in late August we suffered a structural failure at our Irgovel plant that shutdown the plant. Temporary repairs remained and the plan was restarted in mid-September. Irgovel is currently processing raw branded at higher levels and the maximum capacity prior to the expansion, but continues to operate at lower levels than our post-expansion targets.

Ongoing adjustments to the damaged boiler system and warehouse will continue to limit production until final repairs are made.

While these conditions negatively impacted our performance in Brazil in Q3 where our rice bran availability is improving due to increasing supplies in Brazil coupled with the addition of new supply sources in Uruguay and Argentina.

As a result of the improving supply picture, we decided to accelerate the timetable for annual maintenance shutdown from January 2015 to December 2014. This will enable us to complete annual maintenance and necessary repairs, so the Irgovel plant can run at our targeted post expansion production levels beginning in January.

Demand for our rice bran have been strong and we’re confident that we can have the bran running in 2015 and achieve this significantly improved financial performance at Irgovel that was anticipated begin in the second half of 2014. While demand picture for our USA segment also remains strong, we continue to experience supply chain disruptions in Q3.

The most significant problems were related to California’s 100-year drought. Rice plantings in the region were down to 5%. Reduced rice for milling has meant less raw bran availability and a higher raw bran prices and resulted in delayed shipments and unmet orders in the quarter.

Despite those supply chain challenges net sales in our USA segment increased 92% in the quarter and 94% in the first nine months of 2014, compared to the same periods in 2013. More importantly, gross margin in the USA segment increased to 34% in Q3, up about 10 points from 24% in Q3 of 2013.

And gross margin dollars in USA segment nearly tripled to $2 million in Q3 this year, up from $700.000 in Q3 of last year. This significant margin improvement reflects the potential of our business model, as we continue to shift our product mix towards higher value, higher margin, human ingredient and functional food sales.

In response to the challenges in Brazil and the supply chain risks in our U.S.A segment, we reformulated our tactical plans to position our company to accelerate future growth. We completed an additional capital raise in October to support repairs at Irgovel and provide working capital to opportunistically acquire raw bran from Uruguay and Argentina.

We’ve also earmarked funds from that race to strengthen our USA segment supply chain. We’re currently evaluating a number of supply chain related projects in both California and the mid-south and we expect to implement one or more of those projects in 2015. We’re confident that those investments will help to mitigate supply chain risks in the future.

At this time, I’ll turn the call over to Dale to comment on our third quarter results..

Thanks, John. For the third quarter of 2014, consolidated revenues were $10.4 million. That’s a 19% increase over Q3 of 2013 revenues at $8.7 million. The increase of revenues was a direct result of strong performance in our USA segment, where as John has already noted, revenues have increased 92% to $5.9 million, compared to last year’s third quarter.

That increase was principally attributable to the January 2014 acquisition of Healthy Natural. Brazil segment revenues were down 20% in Q3 compared to the same period last year and that’s a result of brand availability and the plan issues experienced in the third quarter. Gross margins at our USA segment reached 34% during the quarter.

That’s a 10 percentage point improvement from gross margins of 24% recorded in the same period of 2013. It’s also a sequential 10 percentage point improvement from Q2 of this year. That margin improvement is due entirely to the success of our strategic initiative, which is to shift our sales mix towards human nutrition and functional food products.

While gross profit was negative in our Brazil segment due to the brand availability and mechanical issues just previously noted. We believe those issues are largely behind us and we inspect to begin to see the benefit of increasing production and sales at Irgovel as move into the new year.

From a balance sheet and liquidity perspective, we deployed a significant percentage of the capital recently raised to launch our critical business growth initiatives. As John noted, our Dillon plant expansion project is expected to be fully operational this month and the expansion at our Healthy Natural facility is already complete.

Our focus now is on increasing profitable sales of our highest margin products to fill this newly installed capacity and to maximize returns on those valuable investments.

We expect new product development along with sales projects already in the pipeline to have a significant positive impact on both revenues and gross profit as we began to benefit from higher volumes of production and sales supported by minimal increases in operating cost. Mark will talk more about this in his comments.

We currently have several million dollars of cash on hand and our USA segment assets remain available a security for credit lines.

Discussions continue with various parties regarding commercial loans and other debt alternatives and we expect to put our facility in place early in 2015 to replace the $8 million revolving working capital facility that was paid off this past summer. With that, John, I will turn the call back over to you..

Thanks, Dale. For those of you who listened closely to Fred’s introduction at the beginning of this call, you have noted that reassigned responsibilities within our senior management team. Robert Smith has take responsibility for USA segment operations and Mark McKnight has taken responsibility for USA segment sales activities.

With that in mind, I’ve asked Robert to give you an update on some of our key operating initiatives for 2015. After Robert’s comments, Mark will give you an update on some of our current and future sales activities.

Robert?.

Thanks, John. As mentioned by John and Dale, we have invested a significant amount of time and capital to several of our USA facilities this year to greatly increase production capacity and integrate Healthy Natural into our operating systems and processes.

Those efforts resulted in production interruption that coupled with the supply chain issues previously mentioned, slowed our growth in the quarter.

We did, however, focused on production and sales of higher margin products, helping us to mitigate the impact of those challenges and achieve a significant improvement in USA segment gross margin percentages and gross margin dollars.

The good news is that demand for our products continues to increases with a planned expansion that Healthy Natural build and now complete, we are poised to increase sales throughout 2015.

We will continue to target finished products for the Healthy Nutrition market and functional ingredients for the health and wellness sector, where we are establishing ourselves as the market leader in rice bran and derivative products.

We are evaluating key operating initiatives for 2015 with a focus on additional measures to ensure access to raw rice bran supplies in 2015, sufficient to meet demand at all of our USA facilities.

These initiatives include improving production planning and inventory management processes, increasing storage capacity for stabilized rice bran, obtaining additional raw bran from existing brand suppliers and adding one or two new raw rice bran suppliers.

In addition, we have identified a number of operational procedures that we believe an improve production efficiency and reduce product waste. We are confident that these efforts will help to mitigate supply risk and further improve product margins. I’ll stop here and hand the call over to Mark..

Thanks, Robert. Throughout 2014 from a sales perspective, we have been working on three important initiatives. First leveraging our process patented ingredients in the value added new products and product streams.

Second attracting new customers, we shipped finished samples or initial launch shipments to six new customers in the third quarter alone and third growing sales with existing customers by offering expanded ranges of products.

I am pleased to report we have made great progress in all of these areas and I want to take a minute to further explain the importance and potential of the first initiative. By way of example, in the past, a 100% increase in ingredient sales revenue would require a 100% increase in production capacity.

Going forward by using our process patented products has the key ingredients in new formulas, we can generate 4X or 5X and increase sales revenues effectively leveraging our recent investments in new production capacity well beyond in the historic 1:1 ratio. That fact leaves us very well positioned for additional profitable sales growth.

In early 2014, we set internal targets to develop at least 20 new products and formulations. So far this year, we have developed more than 50 new products and the majority of these new products have either already launched in the third quarter or are expected to launch by year-end.

To put that in context, we have developed more new products at Healthy Natural in 2014 than we did in the previous four years combined. We expect to continue that strong pace in 2015. On the new customer front, we have added several new customers for both functional food products as well as for the launch of our new lines of Nutricosmetics.

Nutricosmetics is an area of great promise for our company as that market is a high margin growth opportunity. In addition to the significant progress we have made in product development and new customer wins, we have also grown sales within our existing customer base.

In some cases, we have grown through their success and selling to their end customers. And in others through our marketing of additional SKUs to them. Prior to the acquisition of Healthy Natural in January of this year, the plant was operating at full capacity. We have no ability to grow.

Now based on the doubling of capacity recently completed, we are well positioned to rapidly increase production and sales as some of the numerous new products we developed are well received in the marketplace.

I’m very optimistic that the investments made an expanded production capacity in 2014 will enable us to drive strong sales growth for the foreseeable future. Let me stop here and pass the call back to John..

Thanks, Mark. Our third quarter results were negatively impacted by significant operational and supply chain challenges in both the U.S. and Brazil. Nevertheless, we continue to demonstrate the tremendous potential of our business plan.

It is especially evident in USA segment where we’ve delivered year-over-year sales and margin growth in spite of the operational and supply challenges.

In Brazil, the condition that resulted in the supply constrains have largely abated and we believe the additional sources of raw bran supply coupled with more normal operations at Irgovel will now begin to fuel production and sales growth.

In essence while the challenges we have experienced this year have slowed our growth rate in 2014, we believe the issues in Brazil will be behind us as we enter 2015 and this effort taking could address supply chain issues in the U.S. will help mitigate raw bran supply risk next year.

As a result of our decision to accelerate the timetable for repairs in Brazil, the Irgovel plan will not be in production for much of December. When taking this into consideration along with the projected Q4 sales from U.S.

segment, we now see full year consolidated revenue for 2014 in the $40 million to $42 million range with negative adjusted EBITDA of $3 million to $4 million.

Looking out into 2015, in factoring and the potential effects of the drought in California, we see full year consolidated revenue exceeding $67 million with positive adjusted EBITDA ranging between 10% and 12% of net revenue. This guidance is concurrently being filed in a Form 8-K with the SEC.

In closing, I want to emphasize the demand picture for our product continues to strengthen and we now have the installed production capacity to generate sustained profitable sales growth.

We have a talented and committed management team that is working hard to deliver on the better than 50% top line revenue growth plan for 2015 along with solid positive EBITDA performance.

We believe the headwinds we have faced in 2014 to be largely behind us and we’re confident that are plan to mitigate the supply chain disruptions experienced in both the U.S. and Brazil will provide sufficient raw bran to support our aggressive sales plans for the coming year. That concludes our prepared comments.

Latonya at this time please open the call for questions. Note that we’ll limit callers to one initial question and one follow-up..

Thank you, sir. We will now begin the question-and-answer session [Operator Instructions] Our first question comes from [indiscernible]. Please proceed with you question..

Yes, hi John, this is [indiscernible]..

Hi, David how are you? It makes you acquaintance..

I just have a little question concerning the USA segment. I know still coming of the HNN or welcomes from MLM customers or partners.

Do you have any color on the breakdown in our network sales with MLM partners?.

This is Mark, I would be happy to answer that question. I have been supplying natural products companies for 22, years. And historically, direct sale companies and MLM companies do very well during tough economic times.

And so from my perspective there has been very strong growth in that industry over the last six or seven years, in large part because people who are aggressive and go oriented and cannot find a job, tend to look for alternate ways to make money if they’re not fully employed.

And so we have seen from our customers and other contacts we have in the industry, that a lot of different direct sales company have had strong growth in the last six and seven years. And as it continues to be tough for talented people to find good employment, we think that will continue..

Okay..

David, did that answer your question..

Yes, I think yes, I have one more follow-up question..

Sure..

Yes, this one yes on [indiscernible]. Well right now coming into 2015 I know there’s some guidance about $100 million top line you mentioned that there is some of the production hiccups in terms of the unexpected repairs going into the fourth quarter.

How do you feel about the guidance you gave in earlier here for 2015 with all that? And your concerns about heightening your supply chain within the U.S.

and Brazil as far as sourcing your RiceBran?.

Yes, David, just to be clear, we’ve not given guidance on 2015 ever until this call. This is the first time that we’ve discussed guidance for 2015. But let me see if I can address the related question about supply. We’ve had some challenges both in the U.S. and in Brazil in terms of raw bran supply.

And in California, the drought resulted in all growers of old crops being cut back 25% to 30% in terms of available water. Rice was not an exception and the rice farmers cut back depending on what we talked to between 25% to 30% during the course of the year.

Because of the way our business has been structured historically - by the way to my knowledge we’ve never seen that before. This is kind of a first. But the way we’re structured, we have our stabilization facilities inside of two rice mills in the Sacramento Valley.

So with a cutback of 25% across the board in water, and the relating cutback in plannings each of those mills saw their rice growers cutback similarly. As we look at 2015, we have no assurances that that drought is going to abate. And from, I guess, legal point of view that’s the right way to describe that.

The state and federal water authorities have the ability to cutback another 25% next year if the drought continues. So we have raised some money in October, partially to cover repairs in Brazil and bran acquisition outside of Brazil in Uruguay and Argentina.

But in California some of that money has been earmarked to make some of the changes towards supply chain that Robert was discussing earlier to actually bring on additional mills, because there’s plenty of bran in the Sacramento Valley. We have to be organized to take advantage it.

So we’re doing the things that we need to do to be able to have the bran to support the sales growth and the guidance that we’ve just given.

Down in Brazil, we took some of the October capital raise and we invested that in the repairs that need to be made, but also into going outside of Brazil to acquire additional bran because there were challenges in the Brazilian market as well.

Some of the good news down in Brazil is that they as California were suffering from a couple of years of severe drought that was impacting the industry [indiscernible].

The good news is that this year it has started to rain, the big event, so whatever the alluminio [ph] equivalent it is down there when we’re down a couple of weeks ago, the rivers were coming over their banks and there was so much water out in the fields that they’re actually going to delay rice plantings for a couple of weeks until that abates.

I guess arguably bad news in the short-term for two or three weeks to like it plant, but great news in terms of the impact that we expect that to have in the harvest and as a result on the availability bran in Brazil.

So we see the Brazil challenges of dealing and we’ve got a game plan in place that I think will allow us to get access to bran in California from a additional partners to support the sales plan we have for 2015..

Okay, thank you..

Sure..

[Operator Instructions] Our next question comes from Bruce Galloway with Galloway Capital. Please proceed with your question..

Hi, guys.

To acuminate the drought in California, why didn’t you try to shift production to Texas and Luciana and why not I guess the Louisiana plan is pretty much idle right now, what did you start that up and trying to focus on that where there is availability of Rice and RiceBran?.

Bruce, The Louisiana plant is not idle, but the issues really come to be – by the way hi, how are you?.

Good..

So the Louisiana plan is not idle, a lot of this issue is customer driven. So we have customers who do product development based on brand that comes from different regions of the country and the customers specified where they want their brand from.

So we are a number particularly of our human ingredient customers, once their brand come from California..

Actually today – this is Robert Smith speaking. But we have plans in California that are set up at serve a lot of our West Coast customers of course in a lot of customers that require the human grade ingredients, food ingredients, they are serviced out of California.

In the Louisiana we have a facility that does a lot of stabilization of bran today and we serve a lot of customers around the country and those are animal customers.

As we look forward to 2015 and making some of those adjustments to our stabilization facility, we have considered being able to supply all of our customer base for both Louisiana and California going forward..

But, again at the end of the day, customer decision, if the customer says I want California rice, that’s what they want and that’s what we need to try to get to them.

Is there a difference between California rice bran and Louisiana rice bran?.

Sure..

Yes, absolutely. So there is a difference between rice and varieties of rice grown in every region around the world that are perhaps modest, but for example, in certain regions we see the oil content of the rice as low as 18% and in other regions as high as 22%. Well, to us we kind of say as a consumer that’s not much.

But if you put the ingredient into a blend then you have a 3% or 4% difference in the oil content. It can actually make the blend perform differently. So the food technologists who are dealing the blends are very specific about what they develop, what they want, how it needs to interact with other ingredients.

And then, addition, we have different rices in the different catchments. So in California you get long grain rice, you get medium grain rice, you can get sweet rice and the customer specify the rice they want.

So it isn’t as easy as saying let’s pickup and move to Bremerton if there is a problem in California, because the customer needs medium grain bran from medium grain rice from California for a specific application and they know how it behaves. And before they would be prepared to change that it got to go through another product development phase.

So we’re doing the best as we can to keep up with the orders, but the fact is we delayed a lot of shipments in the third quarter and because of the ways some of those fields rolled for we ended up with unmet orders in the quarter that impacted our revenues.

And the game plan we have in place to deal with that is to broaden our access to bran in the Sacramento Valley and to do the same thing in the mid-south quite frankly. .

And this is Dale. There’s a cost issue as well. If you’re going to shift human food grade product there you have to be certified for that. And there’s a cost associated. .

Okay. Bruce, does that answer your question..

Yes, yes. Also on you guidance, $67 million I mean you are assuming last quarter that you were going to have some – delay starting up some of your plan expansions and everything, but you’re originally looking for $41 million in the second half and about $6.5 million in EBITDA in the second half and of course you know you had all these pickups.

But looking at that projection assuming the plans you’ve built out and running properly, I’m looking at the projection for $60 million to $67 million for next year, hopefully, when everything has built out and producing properly.

It seems pretty conservative vis-à-vis your original guidance for $41 million and $6.5 million for the second half of the year for 2014..

That’s a fair comment. That’s absolutely – and just to be clear, Bruce, what we just said and what you’ll see in the filings is that we’re looking to get a minimum of 67 for next year and that’s our target is to deliver about that.

We still have some uncertainty related to the drought in California and it’s going to take us some time to – when you look at putting in place arrangements, we have new mills and those are the discussions we’re having right now. We don’t just tap on the door and plug in our machines there, right, there is a negotiation.

Those negotiations are underway. We expect that we’ll be able to begin to move forward with one or possibly two installations in Sacramento valley, early part of next year.

But we don’t expect to have those that equipment in and operating until second quarter early third quarter or something like that because there is – we’re building plans inside of plans.

So when we look at this next year, when we – let me say at this way, when we give the guidance for the 2014 year – in August of 2013, this drought impact was not on the horizon.

Certainly, it appeared through this last summer and it had a very significant impact, it isn’t going away at this point in time, so we have different strategies or how we get access to bran to support the sales opportunities, but we want to be conservative and we think that the number we gave at 67 is an achievable and can be beaten and that’s what we’ll work to do..

Okay..

I appreciate your questions Bruce, thanks..

Next question comes from Todd Eagan [ph], a Private Investor. Please proceed with your questions..

Hi, guys.

Last conference call, I was on and asked you specifically if you would – if you’re doing any other rises in the near-term and you certainly you wouldn’t a way would be maybe because of the acquisition that would help sales in earnings and then no one will go out on October 1, saw the new value are rising from funds that being said how many more do you anticipate during or you sure at this point..

I will give you same answers last time Todd, and I don’t meant to be cheeky here when we spoke last time in the middle of August that was our intention. When the Brazil plant have the structural failure in the baghouse in boiler system that shutdown the plant did a couple of things.

I think as Bruce was commenting earlier, the game plan for this year was to make significant investments in H&N in billing and at year ago bill to position ourselves to grow the business significantly in the second half of the year.

Both the brand supply issues but just as importantly the structural failure of the baghouse done in Brazil it shutdown the plant through the second half turn off particularly in Brazil I think you guys understand the Brazil is roughly half the business right.

So when you look at where we’re what where we were at the time we had a second half plan that wasn’t going to materialize that second half plan has effectively been pushed out to the first half of this next year.

Because Brazil is still running better than our previous maximums but under our 9,000 to confirm on target but we expect we will as we complete the final repairs to the boiler system baghouse in December we expect to open up January with being able to run at and ideally above that 9,000 ton per month revenue processing capacity.

So there is no question that be growth ramp up for the business has been pushed back particularly in Brazil but we think we have those issues under control the rise that we did on October was specifically to cover the needs we had in Brazil for the repairs to the plant and the brand and to deal with the brand supply issues there..

So there was no insurance that could have help to alleviate some of those costs..

Yes, sure and we filed on it within the next 18 or 24 months that will be result, Do you how insurance works right..

Yes..

They said first go back and filed the claim against the guys who build the baghouse and your claim is which we done right we filed a loss against those guys but that claim is not successful come back and talk to us. But we have some pending litigation with the people.

We bought the business from them in Brazil that’s has been on for four and a half years and isn’t resolved yet. So we’re not optimistic that that’s something that will be resolved in the short-term. Is that possible that something will come out of that further down the road? Sure.

But in the short-term we actually have to respond to the needs of the business..

And there’s an insurance concept there. Mechanical failure is not considered an act of God, business interruption as well..

Okay. Sounds like something out of Brazil. .

Pardon?.

I said it sounds like we should get out of Brazil. .

Except that’s where the rice is. And we are RiceBran Technologies..

Fair enough. We understand your frustration, Todd. We’re as frustrated as you are. And we want to be in a position where we went through another raise in October? No, right. And will we make any promises for the future? No. We don’t have anything on the table immediately in terms of expectations for something like.

There’s no immediate acquisition on the horizon or anything like that. Going out we’re very focused right now on taking these investments in plant and equipment and monetizing them by building sales. But things happen as we saw from the conference call in the middle of August.

The baghouse [ph] collapsed on August 28 or I think 29, 10 days after the call. What wasn’t planned and we’re not happy about it, but it’s a reality that we have to deal with..

Our next question comes from Al Muniz [ph], a private investor. Please proceed with your question..

Yes.

My question is are you going to be bringing oil on from Brazil to Texas for the cosmetic business?.

Absolutely. In fact, if I could just comment, from my perspective one of the real unique things that RiceBran Technologies is they have fundamentally popular ingredients. What RiceBran Technologies does is it’s very different.

Most people in the Natural Products industry who are selling raw materials don’t have anything to do with making those raw materials. They just distribute them. RiceBran Technologies is totally different because we really do process the rice bran right after rice mills. So yes, there is some limiting and frustrating factors.

But it also gives us such a unique edge. When I’m out talking to customers, there is extreme interest in these things, especially the rice bran oil. That’s why we wanted to push forward in 2015 with the Nutricosmetic capabilities, because people are very interested in rice bran oil in cosmetics.

And so, it’s just one example of how the core technology, that is RiceBran Technologies, those four ingredients, the way I see it they are very popular. It’s why I made the decisions I made with my company a year ago and I feel even stronger about that than I did 12 months ago..

So, Al, one of the – we’re certainly bringing oil up to include in the Nutricosmetics. That oil has actually a whole bunch of actives in it that are very, very interesting in the cosmetics industry.

Robert, can you comment on some of those?.

Sure. And that’s one of the beauties of our operation in Brazil. Of course it’s not simply a rice oil extraction facility. It’s also a facility that will refine the oil into different fractions and various of fractions have lot of chemicals that are very valuable both in terms of nutrition, but also in terms of cosmetics.

And by example, if you look at ceramides that are present in RiceBran you look at gamma oryzanols. Those are all compounds that have been shown through extensive research and development by various groups on a global basis to have very positive effects in the cosmetic lines as well as nutritional lines.

So we’re very excited about what we can extract from RiceBran both in terms of the oil and other type of nutrients and how we can incorporate those into products..

Continuing the question is the equipment installed in Dallas now to process the oil or is that something that made up this quarter?.

So just to be clear we’re not going to process oil in Dallas. The oil is processed and refined in Brazil and oil in different versions, be it become neutralized or refined, will be used in the cosmetics products, but we will bring our oil from Brazil. And it will be blended into the cosmetics as one of the active ingredients in the cosmetics..

So we’re talking packaging revenue and processing..

Okay, okay..

Blending of materials and putting that compounded blend into packaging, yes, but we’re not processing the oil in Dallas..

Yes, the value of RiceBran oil for cooking oil versus cosmetic Nutricosmetics oil is going to be huge from 4x to 20x..

Significant difference, that’s right, yes. And like we pointed out earlier, you take that into a finished good and you get to have an added benefit based on the selling price of that contract package finished good..

Yes..

So remember just to be clear, what we are doing at H&N now with the Nutricosmetics and cosmetics is very similar to what we are doing with the functional foods, right. We are taking, if you take the example of our derivatives out of Dillon, we are taking RiSolubles, RiFiber, RiBalance.

Mark is formulating those into the blends that have our products along with other products. And those are being develop to customer specifications. And then, not only being formulated and blended, but being packaged into a finished product on a B2B basis. They are not our bran but a group of [ph] brands. The cosmetics is exactly the same. .

[Indiscernible].

Mark is developing the formulations, we are including our own ingredients plus other ingredients, we’ll do the blending and packaging the same way we do with the functional foods.

Does that make sense?.

Yes, it does..

Okay. [indiscernible] I’m sorry..

That should be a great year if you can accomplish that in next….

We expect to have a real video in 2015, but like everything else Mark mentioned earlier, that we’ve been a huge amount of product development this year and that product development has done four customers.

Customers basically coming in and say I want something that looks like this and those that and can you formulate it for me, whether it be a wellness beverage or protein beverage or a cosmetic.

So we’re going to joint amount of development, I think, Mark mentioned earlier that more than 50 skews developed and approved by customers that have most of which may which went up in the third quarter, we also what you got in the fourth quarter, but that’s an ongoing development process.

And with like anything else, these guys will take it out into their distribution channels whether it be an MLM, online internet sales, direct retail sales whatever it is. These products are going out, launched into store groups, 50 stores if it successful in the 50, it will go to 100, 200, 400, 500 whatever it goes.

But there is a process to go through here to build that business. And we are working through the process to build the business real excited about where we are because the consumer finds the family of products very attractive. You get back to the level issue of hypoallergenic, gluten free, non-genetically modified, et cetera, et cetera.

The consumer says I want that stuff. So the request we get for development not only at Healthy Natural, but also at our [indiscernible] ingredient side that’s really attractive and we have a lot of opportunities.

So we’ve got to solve our supply problems we miss some opportunities this year because of that, we think we have a plan in place for doing it, but we’re excited about moving into 2015..

So your business plan is basically changed 100% over the last two years..

Yes, historically just think of that comment I made that, we’ve gone from a one to one relationship between revenue and the cost of production and production capacity, to now we’re leveraging that up and what John I just talked about, definitely huge change.

In addition we’re moving along and continuing from animal which was the traditional base of the company to food ingredients, which have higher margins, and then to functional foods are nutritionals and also nutro cosmetics.

So it’s really from my perspective a great strategy that has been implemented by this management team over the last two to three years and we’re just now starting to the fruits of that..

One more question I hope you can answer that, do you have Korean customers?.

We have some direct Korean customers and we have some indirect Korean customers. And we have a lot of development underway in the Korean market right now that hasn’t turned into production orders, but we think that that’s going to be very attractive market for us..

Okay, thank you. And good luck in next quarter..

Thanks, very much. I appreciate it..

Our next question come from Phillip Anderson, with Pinnacle. Please proceed with your questions..

Hi, operator this is going to be the last question and then will cut it off after this one please. Philip how are you..

I’m good John and since this has been a long call, I’ll keep my questions are only a six part question..

We’ll try to fill all six things..

Yes. Mark my first question is how related is, with the revenue guidance the company is given what type of capacity utilization does that imply and if you capable could you break that down among the various operations..

We can I sort of not prepared – I hadn’t prepared to answer that question, but at a very high level, if you think about this led between Brazil and the U.S. roughly think about $67 million as half and half..

Right. In terms of plant utilization particularly in the U.S. so if we….

Let me Philip, try to answer your question, I just wanted to give you a starting point there..

Yes..

If you take the U.S. piece of this with the completion of, the expansion of H&N, expansion at Dillon, can be odd, this is based on brand availability. We can process a lot more brand at the two California locations then we were able to get this year.

But assuming brand is available in all those places, our installed capacity is more than 4X now the U.S. revenue piece, if, that was your question..

Yes, that’s really what I was driving in another words, just a capacity utilization is significantly underutilized now. And then you mentioned customer orders in the third quarter couldn’t be met because of the problems going on. And the various things you’ve already highlighted.

The company was successful in your efforts to obtained additional brand particularly in California, if there’s excess capacity and you can in fact sell more, and customers would not have an allocation some of your costumes may have been on allocations in September quarter..

Some of the customers we’re balancing through better service everybody as best we could in the September quarter, but the brand availability problems meant that we ended up with unmet orders in the quarter.

Assuming we can resolve those issues and we believe we got a plan to do that, the installed capacity to both stabilized brand, if you look at Dillon we just increased the Dillon capacity by a 100% and I would say completed we are returning that one on next week. So it’s being done after nine month project. And we are ready to go there.

But assuming all of these things operate as expected on the U.S. side the installed capacity is at least 4X what we have included in the guidance for next year..

Got you. Thanks very much John. I appreciate that. Thank you..

Yes, see you. Okay, thanks..

At this time, I would like to turn the call back over to Mr. Short for a closing comments..

We just want to thank everybody for joining us, I know its Friday evening. Unfortunately we were at the end of our reporting window for SEC timing. And I think some of you may have noticed that we are going through an order to exchange right now.

So with Mark coming on broad as our new auditor, we were right up against the window we apologies for making you guys join us on Friday night because we know it much later East Coast time than here. And thank you to everybody, for joining the call..

Thank you. This does conclude today’s Teleconference you can disconnect your lines at this time. And have a wonderful evening..

Thank you..