Fred Sommer - Ascendant Partners John Short - President & Chief Executive Officer Dale Belt - Chief Financial Officer Robert Smith - Senior Vice President of Operations Mark McKnight - Senior Vice President of Sales and Marketing..

Russell Anmuth - Gotham Anthony Vendetti - Maxim Group Gregg Hillman - First Wilshire Securities.

Good day, ladies and gentlemen and thank you for standing by. Welcome to the RiceBran Technologies 2014 Full Year Financial Results Conference Call. 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, good afternoon listeners. Welcome to the RiceBran Technologies full year 2014 financial results conference call. With us today are John Short, Chief Executive Officer and President of RiceBran Technologies; Dale Belt, Chief Financial Officer; Dr.

Robert Smith, Senior Vice President of Operations and 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 the 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 a more 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 April 01, 2015, 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 non-GAAP financial measures to comparable 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. A special thanks to our Wesco shareholders for joining the early start of this call. 2014 was a year of important change at our RBT as we position our company to take advantage of growing worldwide demand for healthy and natural products.

We made significant strides to expand our ingredient and finished product manufacturing capabilities and capacities in both our U.S. and Brazilian production facilities.

While we successfully deployed capital raised throughout 2014 to increase capacity, expand our customer base and make advances in product development, we also experienced several challenges including the impact of the ongoing California drought and a major disruption at our Irgovel production facility in August caused by a structural failure in a newly installed piece of equipment.

I’ll address our tactical and strategic plans for addressing the drought later in this call, but as we reported earlier this year repairs have been completed at Irgovel and production is currently running at the target post expansion production levels established in early 2014.

In laying the foundation for 2014 for sustainable growth in coming years we achieved several significant milestones. First, we raised approximately $24 million in new capital net of expenses beginning in December 2013 and throughout the 2014 year. We deployed over 70% of the funds raised in acquisitions, plant expansion and plant upgrades.

Projects at Dillion and Irgovel were completed in the second half of 2014; in addition we acquired Healthy Natural Inc. in January 2014 and immediately launched a project to double production capacity at that location by the third quarter. That successful expansion sets the stage for progressive growth in 2015 and beyond.

At our Dillion Montana Stage 2 plant we completed an expansion project in the fourth quarter of 2014 that more than doubled production capacity and gives us sufficient available capacity to begin larger commercial production of our Proryza protein products in 2015.

As you know our process patented Stage 2 products are key ingredients for the finished products produced as Healthy Naturals, so the increased production from Dillion was necessary to support sales growth based on the increased capacity at Healthy Natural.

In our Brazil segment, we completed the major expansion project to increase the capacity of our bio-refinery by 50%. That project was completed in the third quarter but due to a structural failure in August we ran at reduced production levels for the majority of the second half of the year and had to make additional investments to complete repairs.

We are confident that those issues are now behind us. During the course of 2014 we also made significant investments in technology to prepare for changes associated with the Food, Safety and Modernization Act of 2011, otherwise known as FSMA that came into effect on January 01, 2015.

Those investments in systems and technology are necessary not only to ensure ongoing compliance with regulatory requirements but also to meet the requirements of our global consumer products customers for continuously improving food safety standards.

We’ve upgraded our ERP systems and invested into new process control software that can track individual product large [ph] order supply chain and allow rapid response times to food safety related issues.

We now have 13 employees across all facilities now per management who are HACPP or Hazard Analysis and Critical Control Point showed up by practitioners.

We believe these significant investments in new systems and personnel training into certification are necessary to position RBT to successfully compete for business from our major consumer products company customers who are increasingly seeking high quality ingredients in turnkey products that are non-GMO, soy free, gluten free all natural and minimally processed.

Lastly, we used the portion of the proceeds from last year’s capital raise to pay off the balance of an $8 million revolving credit facility or borrowing cost exceeded 30% per annum.

Looking back on our performance in 2014 by segment while the demand picture for our USA segment remains strong, we experience supply chain disruptions in the second half of the year largely related to California’s now a 1000-year drought, where rice plantings in the region were down 25%.

Reduced rice for milling meant less raw bran availability and higher raw bran prices that resulted in delayed shipments and some cancelled orders in the second half of 2014. Despite those supply chain challenges net sales in our USA segment increased 92% in 2014 compared to 2013.

More importantly, gross margins in the USA segment increased to 30.2% up nearly 6 points from 24.5% in 2013. Gross margin dollars in USA segment rose by 137% to $7 million in 2014, up from $2.9 in 2013.

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 functional food ingredient and packaged functional food sales.

In our Brazil segment, the complete shutdown of our plant for most of the first quarter, raw bran availability issues in the summer and the structural failure at Irgovel in August caused a significant decrease in production volumes. This resulted in a 26% decrease in revenue which fell to $17 million in 2014 compared to $23 million in 2013.

Approximately $1.7 million of that decline was related to a devaluation in the Brazilian currency exchange rate against the U.S. dollar. Despite the difficulties in Brazil last year, demand for RiceBran products remained strong in today’s market.

Drought conditions in Southern Brazil have been mitigated by heavy rains producing a bumper crop of rice that is being harvested as we speak.

Based on improvements in rice and therefore raw RiceBran availability in the Riograndense [ph] state, coupled with the stable operations at our plant we are confident that we can now achieve and maintain the significantly improved production levels that Irgovel anticipated to begin in the second half of 2014.

As we move into 2015 we expect the investments we made throughout 2014 to begin to bear fruit as our product development and marketing efforts begin to fill our expanded capacity in all locations.

We are implementing tactical and strategic growth initiatives on several fronts which we will discuss in more detail along with our discussion of California supply chain strategy in response to the worsening drought. At this time, I’ll turn the call over to Dale to comment on our full year financial results..

Thank you, John. In 2014, consolidated revenues grew to $40.1 million. That’s a 14.4% increase compared to 2013 full year revenues of $35.1 million. We recorded an operating loss of $12.8 for the full year in 2014 and a net loss of $3.96 per share on 5.8 million weighted average shares.

This compares to an operating loss of $10 million and a net loss of $12.95 per share on 1.2 million weighted average shares for 2013. Non-cash charges of $8 million in cash and cash charges of $2 million both related to capital raises and note conversions in 2014 negatively impacted our P&L and are not expected to recur at these levels in 2015.

The increase in consolidated revenues to $40.1 million was a direct result of the strong performance in our USA segment, where revenues increased 92% to $23.1 million compared to $12 million in 2013. That increase is principally attributable to the January 2014 acquisition of Healthy Natural.

Brazil segment revenues were down 26.1% in 2014 totaling $17 million compared to $23 million in 2013. The decrease in revenue was primarily due to the shutdown of the plant in the first quarter of 2014 to complete installation of equipment needed to expand capacity.

Operating inefficiencies associated with restarting the plant and the structural failure in August resulted in a reduction in volume resulting in a reduction in volume and had a significant negative impact on revenues since we simply had less product available for sale Brazil segment revenues were also negatively impacted by an 8.9% decrease in the average foreign currency translation rate compared to last year.

Gross margins at our USA segment reached 30.2% during the year, a 5.7 percentage point improvement from prior year margins of 24.5%.

That margin improvement is due to the strategic initiative to shift our sales mix towards human nutrition, functional food ingredient and packaged functional food products or as we like to say here internally to convert feed to food.

In the Brazil segment our operations resulted in negative gross profit of $2.5 million due to the effects of closing the plant in the first quarter, restart inefficiencies and the impact of the August structural failure previously discussed.

We believe those issues are behind us and we expect to begin to see the benefit of increasing production volumes and associated revenue gains at Irgovel as we move through 2015, all subject to the impact of future currency movements.

From a balance sheet and liquidity perspective, we deployed the majority of the capital raise throughout 2014 to launch our critical business growth initiatives. As John has also noted, our Dillion plant expansion project is complete as is the expansion at our Healthy Natural facility. Both of these projects were completed on time and on time budget.

We are now completely focussed on increasing profitable sales of our highest margin products to fill newly installed capacity and to maximise the returns on those valuable investments we’ve made.

We expect new product development along with sales projects in the pipeline to have a significant positive impact on both revenues and gross profit as we begin to benefit from the higher volumes of production and sales supported by minimal increases of fixed operating cost.

We ended the year with $3.6 million of cash on hand and our USA segment assets remain available as security for credit lines. As we mentioned in the third quarter call back in November, we’ve been in discussions with various parties regarding commercial loans and other debt [ph] alternatives.

We are pleased to report that we signed a conditional commitment letter for an $8 million credit facility from Full Circle Capital. That facility will replace the high cost $8 million credit facility paid off last summer. The all-in cost of that facility exceeded 30% per annum.

The Full Circle commitment is non-binding and subject to normal closing conditions, however, due diligence is nearly complete and we expect that credit facility to close and fund in April. I also want to mention that we received an arbitral award from a Brazil arbitration panel related to the 2008 acquisition of Irgovel.

Since the date of acquisition, $1.9 million of restricted cash has been held in an escrow accounted at U.S. bank, pending resolution of the number of pre purchase law suits. That arbitration was recently found in our favour and the arbitration panel awarded R$3.6 million to our company, to RBT.

While there are still some legal issues to overcome, this award in our favour allows us to begin the process of recovering those funds which will be used at Irgovel to support ongoing operations. And with that I will stop and turn the call back to you John..

Thanks, Dale. And I’ll turn the call over to Dr. Robert Smith to talk about the operating initiatives completed in 2014 as well as key initiatives for 2015 particularly our approach to the California drought. After Robert’s comments Mark McKnight will provide an update on current and future sales activities. Robert..

Thanks, John. As discussed previously by John and Dale primary operational objectives in 2014 were to one, source sufficient brand to achieve production and sales targets. Two, integrate newly acquired Healthy Natural and two USA segment operations while doubling its production capacity by the third quarter.

Three, double production capacity at our Stage 2 facility in Dillion Montana by the fourth quarter and four, increased production capacity at our oil facility in Pelotas Brazil by 50%.

As previously discussed the ongoing California drought caused significant shortages of raw, RiceBran in our supply chain that negatively impacted production in sales growth set for 2014. As a result, a primary operational goal for 2015 is to derisk our raw RiceBran supply chain in the USA segment which I’ll discuss momentarily.

Capital improvements to increase production capacities at each of the aforementioned facilities were completed on schedule and actual production has reached and surpassed target production capacity increases at all locations compared with pre expansion levels in the beginning of 2014.

The installation of machinery and equipment during the year is necessary to achieve the increased production capacity resulted in numerous disruptions at each of these facilities that negatively impacted revenues in 2014, but positions us for solid future growth.

Continuing drought conditions in California require further derisking of our raw, RiceBran supply chain. As such, we have planned additional measures to ensure access to sufficient raw RiceBran supplies in 2015 and into the coming years based on the following initiatives.

Increasing raw RiceBran availability from one of our current brand suppliers in California.

Building up strategic product inventory reserves, securing additional warehouse based in California and Louisiana to support increases in production and inventory and ongoing discussions with raw RiceBran suppliers in California and the mid south to take on additional brand supplies and increase stabilization capacity in those regions.

We are confident that these efforts will further derisk our USA segment raw RiceBran supply chain in 2015 and position RBT to meet increased production and sales target for 2015 and beyond. I’ll stop here and hand the call over to Mark..

Thanks, Robert. During 2014 we talked about three important sales initiatives. One, leveraging our process patented ingredients into value added new products and product streams. Two, attracting new customers and three growing sales with existing customers by offering expanded ranges of product.

First we have leveraged our proprietary and process patented ingredients into new product streams with specific brand names. Earlier this month at the recent Natural Products Expo West in Anaheim, California we launched three of these products, Proryza Brew is a group of RiceBran ingredients designed to supply the craft brewing industry.

Proryza Platinum is a new RiceBran ingredient that functions as a pre-biotic nutritional filler for protein powder blends and three Proryza Crisps is a healthy crisp extruded from our patented RiFiber ingredient that will supply the nutritional bar and healthy inclusion markets. Second, attracting new customers.

During 2014, we developed an unprecedented number of new formulas and new products for customers. We shipped out over 300 sample packs developed over 50 new customer specified formulations and added more than four dozen new customers.

These new customers come from all over the world and several are already placing their second, third and fourth orders with us. Much of our 2015 growth is expected to come from these new customers. Their orders will of course start at modest levels but we expect several of them to reach a seven figure run rate in the second half of the year.

In the past we needed to increase production capacity by a 100% to support our 100% increase in sales revenue. Going forward by using our patented products as the key ingredients in blended value added products we can increase sales by a multiple of the increase in new production capacity.

That leaves us well positioned for additional profitable sales growth. To further expand our list of new customers, we have an aggressive trade show scheduled in 2015. We have a total of 28 different trade shows in which we will be attending and/or exhibiting. That is a 50% increase over 2013 and 2014 in terms of the number of shows.

Third, growing sales with existing customers. Our USA segment boasts [ph] almost 300 companies that either use our proprietary and patented ingredients or purchase contract packaged finished goods.

During 2015 we have refocused our sales efforts on those existing customer relationships that present the greatest opportunities to use our processed patented raw materials at high inclusion rates in their respective formulas.

Customers that use our raw materials at high inclusion rates not only see a great benefit in the finished product but also become much more meaningful to RiceBran technologies. I am extremely optimistic about the positive development of these initiatives and our opportunity for driving strong sales growth for the foreseeable future.

Let me stop here and pass the call back to John..

Thanks Mark. We moved into 2015 with a solid operating platform in both our Brazil and USA segments. Last fall we provided 2015 guidance of full year consolidated revenue of $67 million with positive adjusted EBITDA ranging between 10% and 12% of net revenue.

In our financial plan, we anticipated a progressive growth in revenues throughout the year as part of that plan -- addressing working capital is very high on our list of priorities. We believe completion -- my apologies I have script out of order here.

We believe completion of the Full Circle financing will go a long way toward helping us to rapidly accelerate our revenues later in the second quarter and throughout the second half of 2015.

Moving through the rest of 2015 achieving that guidance will depend on a number of macroeconomic challenges, the most significant of those challenges is in our Brazil segment where the Brazilian GDP growth is forecasted less than 1% per annum for 2015. That is in contrast over a decade of 5% plus average growth.

Additionally, the Brazilian currency, the Real has moved from BRL2.4 reais to the dollar in the third quarter of 2014 to this week's rate of BRL3.2 to the dollar. This economic in currency weakness resulted in some recently well publicized labor issues in the last two months including a trucking strike in February that paralyzed the entire country.

The strike precluded us from shipping and receiving it [indiscernible] 12 days in the first quarter and disrupted production flow for more than two weeks thereafter. That strike has now results and our production has return to normal levels, but the disruption will impact our Q1, 2015 results.

Should Brazil's currency remain at these depressed levels, the impact on our performance will depend on the ratio of domestic sales to exports. Traditionally about two-thirds of the products we produced in Brazil are sold domestically and one-third is exported.

We're making every effort to shift our sales mix to increase export and mitigate the negative impact of local currency devaluation since our export contracts are denominated in U.S. dollars. The second important challenge we face is the drought in California.

As discussed earlier, this drought reduced rice plantings and therefore availability of our RiceBran, which negatively affected our performance in 2014. We have a plan in place to install our stabilization equipment in at least one additional mill prior to the 2015 harvest to enable us access to additional brand for processing.

We believe we will be able to implement this plan prior to the 2015 harvest and this strategy can provide us with a sufficient supply of brand to help us reach our increased sales targets. Nevertheless, this is now being called a 1000-year drought and it is unclear how severe the overall impact may ultimately be.

Well these factors are being address, the demand for healthy natural products that a non-GMO and gluten free continues to grow. Our stepped up marketing efforts are also generating exciting new opportunities to help us reach our financial goals.

We are confident that 2015 will be the year that we reach the inflection point to drive positive EBITDA along with increased revenues. As we look forward to delivering on a promise of our technology for the benefit for our Company and shareholders.

While we do not intend to provide quarterly guidance given the fact we've just ended the first quarter we will comment that we see our first quarter revenues tracking ahead of the comparable period in 2013, 2014 despite the negative effects of the Brazilian currency conversion and previously mentioned trucking strike, and we continue to expect to see our operations ramping through 2015.

In closing, I want to emphasize that the demand picture for our products is continuously strengthening and that we now have the installed production capacity to generate sustain profitability sales growth.

We have a talented and committed management team that is working hard to deliver on our significant growth plans for both revenue and positive EBITDA performance in 2015. While uncertainties remain, we have well developed plans to address them.

We’re -- that our operating plans will allow us to mitigate those risks while we support our aggressive sales plans for the coming year. That concludes our prepaid comments. Operator, at this time, please open the call for questions. Note that, we will limit callers to one initial question and one follow-up..

Thank you. [Operator Instructions] Our first question comes from Russell Anmuth with Gotham; please proceed with your question. Your line is live..

Hi, guys. Given the news of the healthcare, studies that you have recently made are there plans to split or to commercial the healthcare benefits of the products.

Are you running clinical trials of some kind or licensing out to different products to for example, farmers or players in the healthcare industry?.

Russell as you know, we recently completed and put up on the website, made available of course to all of our key customers. Some claims, substantiation, analysis that we contracted with Medicus Research. Medicus is the one of the leading, if not the leading research companies that does clinical trials and the like related to natural products.

We ask Medicus to look at two of our products that have the most clinical trial research work done on them which is rice solubles and rice fiber, and we ask them to look at the available literature that runs from clinical trials, published papers, research etcetera related to RiceBran and particularly related our rice solubles and rice fiber and put together and analysis of what kind of claims we might be able to make if we were do that and we are not related to health benefits that related to product.

What we've decided to do is to put the results of that study on our webpage, you can click the RBT webpage and you'll see that front page, click on it and take a look. What that study does is it substantiates the claims that are available to make for rice solubes and rice fiber.

Now if you go through those claims what you'll see is our products have as we know tremendous benefits that are aimed at cholesterol, lipid level, triglycerides, insulin uptake etcetera, etcetera. That is clear in the literature, it’s clear in the clinical trials.

We wanted to make sure that was clear to all of our customers who are looking for and asking for healthy whole food nutrition, right. So, we have certainly done that.

We will continue on an ongoing basis as appropriate to do additional research, clinical trials and the like and we don't comment on those, but that certainly part of our plan going forward..

Okay. Thank you.

I'm really just interested in understanding if there's a business plan beyond by telling the world that this exist which obviously the substantiation is extremely helpful and the claims are extremely important, but again I'm trying to understand if theirs is a specific plan at the some point that you enact to monetize specifically your technology?.

Russell, we certainly have plans to do that. We have discussions underway with the number of customers and partners and we won't comment on those..

Okay. Thank you..

Yes. You bet. Thanks for the question..

Our next question comes from the Anthony Vendetti with Maxim Group..

Thanks. It's Anthony Vendetti.

Hey guys, I was just wondering, if the currency situation doesn't improve and obviously we see the devaluation at the Brazilian Real, but just in general, if things don't get better, what do you think the FX impact will be for the whole year assuming things stay this bad and just a follow-up on sort of the same thing dealing with the drought conditions in California.

I know you're taking steps to deal with that, but assuming things don't get better with the drought conditions how much does that going to impact your ability to get these – to meet maybe the demand for these orders?.

So, Anthony, let me answer those two questions, first on the exchange rate. My wife tells me that my crystal ball has made up on -- so I don't -- I try not to forecast exchange rates.

We know a bunch of things about Brazil and the Brazilian economy as recently as late January the Brazilian Central Bank was forecasting the Real at 2.6 average through 2015, right 2.6 to the dollar. It is clearly well beyond that.

We know that that's a function of political turmoil related to the Petrobras/fund scandals and all of that coupled with a significant slowdown in GDP that also was not forecast.

So all of this of course – not all of this, but much of this both the Petrobras problem and the GDP problem are partially related to the black swan event of the drop in oil prices in the fall and into this year. So, when we look at the exchange rate what we try to do in the prepared remarks is provide guidance, so people can do their own math.

We're currently two-thirds domestic, one-third export, if the currency stayed were it is today, you can run the math across that. Our $67 million of guidance included roughly 50/50 split, $34 million from the USA segment and $33 million from Brazil, but based on an exchange rate of $240to the dollar.

So where we are now if its stayed this way, you can just run the math and figure out what the impact would be with that split between domestic export sales. Now one of the things we're doing is certainly pushing hard to increase the share of export because those of course are U.S. dollar base.

And that will have a positive benefit, but at the end of the day the split today is two-thirds, one-thirds, so it will get 60, 40 it will still be a significant impact on U.S. dollar translated consolidated sales.

Does that answer your question about currency?.

Yes, yes, that's good. Thanks John. And then, on the California situation.

Yes. Let me – so the California drought of course is very troubling. I think everybody probably saw the deal that the NASA guy put out a week or 10 days ago that if you read it with the negative spin you could go, oh, my god, the end of civilization in California.

I don't think anybody in California including us is going to sit around and let those conditions at least in the short term put aside our business.

So if you think about our current operational structure in the way the business works in California, we have facility established in to mills; one Farmers' Rice Cooperative and the other one at ADM in Arbuckle.

Each of those mills has a captive catchment of growers, so take an example of one mill that has 800 growers and in 2014 each of those 800 growers got 25% less water.

So, it’s the equivalent of only having 600 growers, right, with the reduction in water available to those millers across the valley that resulted in rice acreage planted some differences in numbers from different sources, but reduced from roughly 620,000 acres to 450,00 acres in 2014.

There were less brand available and quite frankly that caught us a little bit by surprise in August, September, October of 2014 when harvest came in and we had difficulty getting additional brand from the two mills where we operate today.

The – what we did in response to that of course was change the way we work with those mills to increase the amount of brand we can get from them.

Additionally, we started negotiations immediately to with other mills to look at the possibility of putting our extruders into a third and possibly a fourth mill in the Sacramental valley and we're having similar discussions in the mid-south.

But if we stick on the California, question of the California drought question, we're working with very large mills in those areas. If we add as we expect, our third mill in the valley that deals with the large number of growers that we will be very well positioned to have enough brand to support our sales plans.

Now, can things get worse and can a quake hit in California fall into the ocean west to the San Andreas Fault, yeah, bad stuff can happen, but we don't believe we're going to be dealing with that kind of scenario and we think the plan we have in place to get access to additional brand coupled with changes that Robert has made in the operational aspects of relationships with our existing mills.

We feel like we're going to have the brand that we need to support a significant increase in sales growth. Anthony, does that answer your question. Would you like more flavor on that one..

Just a little bit on the negotiation to add a third mill, is that something that you think is likely to happen in 2015 or is it too early to say at this point?.

We're targeting to make that, so if you think about rice, I mentioned earlier that we're right in the middle of a bumper crop harvest in Brazil. We have reverse seasons. So, as we are harvesting in Brazil we're getting ready to plant in California.

So, in March, April planting in California which by the way is delayed a bit by the negotiations over what water people are going to get in California. But the planning in March, April will result in a harvest in August, September. So until August, September we are milling brand off of last year's planting.

We're positioned between now in August, September to take advantage of that brand availability and have enough brands available to support our sales plans through that period. When we get to September, October, November, December, we are then looking at this year's plantings.

Nobody knows yet if those plantings are going to be same level down 5%, 10%, 15%, 20% or maximum of 25%, but everybody expect them to be down pretty significantly, the estimates we get from the rice millers and from the co-hort guys who work with the growers, is they are thinking 15% to 25% down.

That would mean plantings going from 450,000 acres, 330,000 acres and less total rice and therefore our RiceBran availability in the valley. But we have a negotiation well underway with a -- I'll describe it as a favored milling partner as well as a discussion with the second milling partner.

So we have two options for installing this stabilization capacity. Our target is to have that in place by late August, early September so that we pick up the 2015 milling season.

We believe that's on track for that timing and with that on track we should have enough brand available to meet our projected sales increases, does that – the simple answer is yes in 2015..

Okay, great. Thanks..

Yes. Thank you, Anthony, Appreciate it..

Our next question comes from Gregg Hillman with First Wilshire Securities..

Yes. Good morning.

You know that leading brand of rice protein powder, raw mills, do you supply them?.

No, we don't.

Raw, I do not know raw mills, whose the – what probably, is that zero [ph]?.

Is that a Canadian Company? I'm drawing a blank on it, but it’s a leading brand in whole foods. I believe that United States.

And, but just my general question is how as your RiceBran differentiated from other RiceBran they go into rice based protein powders?.

So couple of things, Gregg, just to be clear we completed our project with DSM to develop the technology to produce rice protein, until we completed the expansion up at our Dillon, Montana plant, that plant was sold out. We had no ability to increase production, hence no ability to produce significant quantities of rice protein.

So, we have produced some rice protein product. We had distributed to customers. We have nice acceptance and interest in that product, but only now we moving to our position where we have production capacity to support it. So when you go out and you look in the rice protein market in the U.S.

or anywhere around the world to our knowledge there is no rice protein coming from the U.S. The rice protein that is out there is coming from Asia and there are some small amounts of rice protein available to our distribution partner in Europe by now. Much of the rice protein that is in beverages that we see on the shows in the U.S.

is coming from Asia and that protein has its challenges from the point of view of compliance that certain things there's some people are concerned about stuff coming out of the Asian supply chains that started thing.

One of the advantages we will have as we bring our protein products to market is that they're coming out of California which is proceed to be the highest quality rice, the highest quality brand in subject to the most stringent regulation from the point of view of quality control and compliance that certifying, but to be clear we are not a significant player in the rice protein market at this point in time..

Okay.

And then, continuing along the same line, what would be the health benefits of RiceBran over like soy or whey?.

Hi. This is Dr. Robert Smith. That's a complicated question and fairly broad, but let me just this that RiceBran just in general is a unique botanical ingredient. In that it contains certain vital nutrients that are not found in other major crops and I just giving the example, and that would Gamma-oryzanol.

Those are very potent antioxidants that have a number of health benefits. So just RiceBran, just by the sake of being coming from the species of plants that it comes from has unique chemistries that you're not going to find that in other plants.

Beyond that if you think of the major crops that see the world which is soy, corn, wheat and rice, rice is really is the one of the four major crops that has very clean label if you will. It doesn't contained any of the major allergens that are call out and need to be on the front of package of the rice.

Whey source is non-GMO and so for all practical purposes you have very clean label and its very tightly favourite among companies that are looking for clean label ingredients that have a fairly good, avenance [ph] based space support for health benefit.

So in that respect I think that RiceBran really is a favorable ingredient in the marketplace for that..

Gregg, you can also see if you click on this stuff on our website that RiceBran does have a number of identifiable health benefits that sort of aim at two major families of things which is led chemistries in the kinds of things that people see as precursors to diabetes and stuff like that and to inflammation in joint health.

So there is a bunch of stuff that naturally occurs in the RiceBran with very identifiable health benefits in addition to the clean label. And you see a lot of folks putting up on their products these days not only non-GMO and gluten free, but soy free is a big one because the FDA requires soy to be called out as an allergen.

And as Robert said, rice generally in our RiceBran products at that whole litany of clean label stuff, non-GMO, gluten free, soy free minimally processed, all natural vegetarian, vegan et cetera, et cetera.

So really opens up, a couple of things that open ups the opportunity to add additional business with non-existing customers, we see in the press all the time that everybody and his brother is looking to add healthy whole food nutrition into their product families.

Most recently, there was a big article about Hershey adding a whole bunch of healthy snatch and I just don't want him to start making the chocolate personally. But I think healthy snack are good. So, really we have a lot of opportunities in the market, we have a lot of people coming to us for ingredient.

It also opens up the possibility of using marks, talents and the H&N capabilities to formulate for customers that want non-GMO, high allergenic, Gluten free non-soy, non-lactose etcetera, etcetera, etcetera, kinds of products.

And Mark mentioned earlier that we have added a whole bunch of new customers with a whole bunch of new formulations that are starting to get traction and that is exactly the space that those customers are playing it. They are coming to us to provide them those kinds of products and we think the opportunity for growth there is very significant..

And then finally in terms of the rice enough supply from, I take it you consume a very small percentage of the world's rice production or even though the high quality rice production.

So I think you should be able to get a hand on the supply problems at some point?.

What I was trying to explain earlier is the supply challenge is directly related to the number of farmers they grow from mill, even if we see what people believe would be the maximum reduction in water availability in California 25% and hence our reduction in planted acres from 450,000 to 330,000.

This year the plan we have in place to add a footprint with another large mill in the Sacramento Valley would give us a nice increase in our brand availability that would more than support our 2015 plant and actually position us well for 2016.

So even though the total pie is shrinking we are getting more brand from our two existing mills by virtue of operational changes, one of those mills connected us, each of those mills that we work with has two mills on site previously we were connected to only one mill in each location.

Robert and his team have organised the connection already to a second mill in one of those locations, so that gives us a certain amount of increased supply and the negotiations we have underway to have a third location in place by the time this year as harvest comes in, I think position us well to deal with what is a real serious challenge.

I mean the California drought is a serious deal, nobody should underestimate it, but we have a game plan in place to deal with it to ensure we can support the business and we feel good about being able to do that at this point of time..

Thanks for your comments..

Sure. And thanks for your question Greg, appreciate it..

And our next question comes from Allan Nemus [ph] private investor..

Well my question, good morning. My question is….

Good morning, how are you?.

So just fine, and I’m wondering about HNN expansion part of it – my understanding was Nutricosmetic and personel care products and that was to be completed by the second quarter of 2015.

Is that on schedule or is that already completed?.

Hi, this is Mark McKnight. Yes, that is completed and we have seen a dramatic increase in our Nutricosmetic business, so we have launched about seven new products into the market place through various customers and we’ve seen growth that is significant for us, for that market.

So I believe that the future for Nutricosmetics particularly because of the nutrient rich RiceBran oil that is full of ceramides and all types of other nutrients that are good for the skin, I believe that that has a very strong future for us.

We’ve seen nice things in terms of new customers, new products and significant revenue growth since last September, October when we first started shipping those products.

And we expect that you know as a business that like anything else is going to ramp we have a whole bunch of new customers that we delivered product to, they start listing whole [ph] orders as they reorder, restart to see those orders build, but we like where we are in that space and we think that space is a great space to be in.

We think that overtime that can turn out to be a very significant portion of the business..

Now that would be probably their highest margin product that you would have I would imagine the way there…..

It’s high margin..

Next question, with Brazil the possibility of importing Stage 1 from Irgovel to the U.S.

for further processing is that possible with or is it certification problems what’s bringing their product into U.S.?.

Well Al, complicated story. I’ll make two, first of all not practical shipping you know heavy materials around the world is a challenge. Secondly, remember the process down in Brazil is different than the process in the U.S. So down in Brazil we separate the oil first and then we process defatted brand, here in the U.S.

we stabilize full fat brand, so it’s not exactly a cross over. However, one of the things that we are doing, I’m going to be down in Brazil again on the 12th I think of April with our head engineer and we have shipped a couple of our extruders down to Irgovel.

We’ll be installing those extruders in rice mills in the state of [Indiscernible] that will give us a couple of advantages as we move forward one will be stabilizing Bran remotely keeps the FFAs down and allows us to be more efficient in our extraction, so we will – we’re testing these.

One of these will be installed in a remote mill in a place called Alégrate [ph] which is about 500 kilometres north of Pelotas where our plant sits. The second one will be installed in the mill that’s five kilometres away from us. That will allow us to stabilize bran, what that will do is two things.

First of all it gives us another large pool of stabilized bran that allows us to manage the flow of raw materials through our extractor. Secondly, it creates the initial base that can allow Irgovel to get into human ingredient cells with stabilized rice bran.

So we’re in the process as we’ve said previously one of the opportunities for the business is to cross over technologies, cross over our North American technologies into Brazil and at some point in time in the future to cross over our Brazilian technologies into the U.S.

We believe there is absolutely ample market and opportunity for both of those things and we’ve started that process, but shipping the Bran or the downstream derivative products from U.S. to Brazil or from Brazil to the U.S. for further processing is less attractive economically, not impossible but less attractive.

Well, I don’t know if that answered your question or not..

Yes it does, and wish you a prosperous 2015 for all concerned..

Thank you we appreciate the support. I think we need to – operator I think we need to call off now. I think the market opened in New York and it’s time to stop, but we want to thank everybody for joining us and again special thanks to our shareholders and investors on the west coast who dialled in at a very early hour.

Thanks to everyone and thank you operator..

Thank you. Ladies and gentlemen, this concludes today’s conference. You may disconnect your lines at this time. Thank you all and have a good day..