Fred Sommer - Ascendant Partners, IR Dr. Robert Smith - President and CEO Brent Rystrom - Chief Financial Officer Michael Goose - President, Ingredient Sales and Marketing.

Chris Krueger - Lake Street Capital Markets Mark Hagen - Oak Ridge Financial.

Good day, ladies and gentlemen and thank you for standing by. Welcome to the RiceBran Technologies’ 2017 First Quarter 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..

Thank you, Operator. Good afternoon listeners. Welcome to the RiceBran Technologies’ first quarter 2017 financial results conference call. With us today are Dr. Robert Smith, Chief Executive Officer and President of RiceBran Technologies; Brent Rystrom, Chief Financial Officer; and Michael Goose, President of Ingredient Sales and Marketing.

Before I turn the call over to Robert, I want to remind listeners that during the call management’s prepared remarks may contain forward-looking statements that are subject to risk and uncertainties. Management may make additional forward-looking statements in response to your question 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 the 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 as of today, May 11, 2017, 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 Dr. Robert Smith, CEO and President of RiceBran Technologies. Dr.

Smith, please go ahead..

Thanks, Fred, and thanks to our listeners for joining today. Our first quarter results have begun to demonstrate the substantial progress we have made in the implementation of strategic initiatives, designed to generate substantial value for our company and its stockholders.

Our strategic focus is primarily in three major areas and we are pleased with the progress we are making in these efforts. First, an immediate and ongoing effort driving down costs and expenses in our operations and repairing our balance sheet.

Second, centering our efforts at building our food, animal nutrition and specialty ingredients business, while consolidating operations and divesting non-core assets. Third, we are setting the foundation to deliver accelerating long-term revenue growth and expansion in our EBITDA margin.

We believe our first quarter financials clearly show that we are moving in the right direction in these areas.

Before I turn the call over to Mike Goose to discuss our sale progress, I would like to briefly highlight some important accomplishments that we have taken -- put -- that have taken place in the first quarter to position our company for future success.

First we achieved a 19% reduction in total operating expenses, including the $466,000 quarterly reduction and SG&A expenses, and we expect to maintain the cost reductions going forward. As a result of reductions and expenses, we were able to achieve a 92% improvement in operating income from our U.S.A.

segment, which totaled $1.5 million in this year's quarter, compared to a $771,000 in quarter one 2016. Additionally, our corporate and U.S.A. segment achieved adjusted EBITDA of $731,000 which almost matched full year 2016 adjusted EBITDA of $789,000.

It is important to know that this substantial improvement was achieved with only a modest increase in topline revenue. Second, as was mentioned in our year end call in March, we completed an $8 million equity and debt financing in February of this year that will lower our annual cash interest expenses by $0.5 million.

The financing substantially improve liquidity and will allow us to better drive future revenue growth, upgrade our facilities to better service customers and continue our streamlining efforts. Third, we significantly improved our balance sheet through the termination of rollup rights held by our minority co-investor in Nutra S.A. in Brazil.

The net effect of that termination resulted in shareholder equity improving to $7.9 million at the quarters’ end compared to a deficit of $632,000 as of December 31, 2016. Most important, our shareholder equity now exceeds the $2.5 million minimum requirement for continued listing on NASDAQ.

We now have until September 6th of this year to address the $1 minimum bid requirement to regain full NASDAQ listing compliance. And fourth, we closed our former corporate headquarters in Scottsdale, Arizona at the end of this quarter -- of the quarter.

We estimate this will result in an annual savings of approximately $250,000, which will become fully realized beginning Q2 2017. As we move through 2017, we believe that our improved liquidity and balance sheet coupled with stronger anticipated operating margin in our U.S.A.

segment will provide a solid foundation to report the sales growth of our food, animal nutrition and specialty ingredients products. As we create more leverage through our ongoing focus on controlling corporate expenses, we are confident that we can deliver progressive improvement in our operating results throughout the year and then years to come.

As many of you are aware, our company was built on technology. Our proprietary products meet increasing consumer demand for minimally processed sustainable nutrition and clean label ingredients. It also has the additional benefits of providing specific functionalities for various food applications.

As we continue to improve our balance sheet and operational efficiency, driving sales growth will enable us to fully unlock the value of our technology for the benefit of our stockholders.

At this time, I’d like to turn the call over to Michael Goose who will update our listeners on our progress in driving long-term sustainable revenue growth in our target markets..

Thank you, Robert. We see three targeted tier to successfully accelerate our revenue growth. Tier 1 in the near-term sale cycle, we believe animal nutrition products offer numerous opportunities for growth with existing and new customers.

Tier 2 mid-term sale cycles focus is on further penetrating markets like bakeries and mills where our products could provide useful solutions and products like flours. Tier 3 and our long-term sale cycles are a biggest opportunities that consist mostly of major CPG companies.

Each one of these targeted tiers represents market opportunity that could drive tremendous sustainable revenue if we execute properly. For example, the companion pet industry represents a largely untapped high-growth market for our products and as you know this industry is much larger, larger than the equine feed industry.

Based on our success in penetrating the equine feed market we feel confident that we can also thrive as a premium pet food product ingredient in the future. While we achieved modest topline growth in our U.S.A.

segment in the first quarter, we continue to make great strides in achieving our goal of sustainable long-term sales growth in the food, animal nutrition and specialty markets. As I mentioned in our previous conference call, our strategy to build sustainable sales growth is simple. Our team is focused on achieving three goals.

Goal one, grow current customer base; two, bring in new business; three, focus on return on investment. We have already made substantial progress within our current customer base, as a result our team reaching out to work with current customers in the second half of last year.

As a result of those efforts we saw growth in ingredient sales from seven of our top 10 customers, with six of those customers growing in double digits. Our contract manufacturing business also generated modest growth and we continue to work with our key customers to deliver the innovative product that they need to drive sales.

Our efforts to generate new customer growth is also beginning to take hold, we are starting to see new accounts come on board and we are pursuing projects with many large CPG companies. For example, we are currently working to get our ingredients used in snacks, flours and dry goods products within many CPGs.

We believe that these types of customers have the potential to significantly improve revenue growth. We are working hard to drive these opportunities all and I look forward to providing updates on our progress over the remainder of 2017.

While we focus on driving sales with existing and new customers, we continue to prioritize our return on investments and all of our efforts to ensure that future business growth flows to the bottomline. We have reduced cost including total tradeshow presence and are now focused on the shows that know will drive our key initiative.

For example, next month we will be probably presenting our products at the IST Show in Las Vegas and hopefully we will see some of you at the show. Our future growth will be driven by a couple of factors.

One, current customers that are having success with our current product; two, new customers that are looking to clean up their ingredient desk, our products are particularly useful in cleaning up ingredient desk, because they meet many of the current macro trends being driven by the shift and consuming better for you products.

Rice bran is benefiting from growth in trends such as non-GMO, gluten-free vegan, healthy fat and high fiber and protein diet, as these trends continue to grow so thus rice bran’s revenue opportunity.

Before I turn the call over to Brent, I want to emphasize that I believe we have opportunity for RiceBran Technologies to become a staple ingredient in many household products. The feedback we have received from the trade has been excellent and we are a densely nutritious product that meets all major trends.

Throughout the remainder of this year our sales team will continue to work hard to position RBT to deliver strong future sales growth and I look forward to reporting back on our progress in next few calls. Thank you for your time. I will now turn the call over to Brent to discuss our first quarter financials..

Thank you, Michael. During the first quarter, we made substantial progress in improving our balance sheet, while we delivered major operating income expansion in our U.S.A. segment. We are focused on reducing our corporate and U.S.A. segment cost, while simultaneously positioning our sales and marketing team to start growing our business.

Two months after joining the company, I'd like to offer some observations on our business. First, we provide unique product that generate impressive margins in all of our product areas.

Second, we are successfully pursuing our sales and market development strategy as discussed by Michael Goose and that should allow us to build meaningful revenue growth and higher EBITDA margins. Third, as we build the business, the leverage on our fixed assets should be strong as absorption improves.

I think this foundation will provide RiceBran Technologies the meaningful path to realizing much better performance in areas like growth, margins, EBITDA and return on invested capital. Our revenue -- our consolidated revenue grew 13.8% in the first quarter to $11.4 million. We sell modest growth of 3.6% in our U.S.A.

segment, with food products up 1.7% and animal nutrition products up 4.2%. As Michael mentioned, we are starting to get traction with our biggest customers in these two product categories and we are adding new customers with significant growth potential. Our Brazil segment posted growth of 48% based on favorable change in the real to the U.S.

dollar, more raw brand processed and a more favorable sales mix. Consolidated gross profit margin rate in the quarter was down slightly at 22.0% versus 22.3% last year. Since our Brazil statement operated at a negative gross profit margin rate the larger revenue mix from Brazil hurt our overall margin. Our gross profit margin rate in the U.S.A.

segment was up 43 basis points to 32.2%. We will be consolidating our distribution center footprint in West Sacramento next week by closing an AMEX warehouse, which should further help U.S.A. gross margin by saving $94,000 in annual rent from that point. Operating expense trends were generally favorable in reflecting considerable company focus.

Our U.S.A. segment SG&A expenses totaled $1.0 million compared to $1.4 million last year and SG&A expenses in our Brazil segment were $518,000, compared to $730,000 last year. Corporate SG&A of $1.4 million increased from $1.3 million, mainly a reflection of $160,000 of fees and costs related to our NASDAQ entering and our corporate relocation.

In addition we shed over $20,000 in monthly costs associated with the closing of our former corporate headquarters in Scottsdale at the end of March. This should be visible in our second quarter SG&A run rate -- SG&A run rate for corporate segment.

Our consolidated operating loss improved by $1.0 million in the quarter to $516,000 loss from a $1.5 million loss in the prior year. Operating profit in the U.S.A. segment delivered most of this improvement of $710,000 to $1.48 million from $771,000 last year.

The operating loss also improved by $358,000 in our Brazil segment to fix a loss of $606,000 from a loss of $964,000 last year. Although, results from the Brazil segment are better, this business continues to realize substantial losses and we continue to evaluate our options for this segment.

Our consolidated net loss of $3.1 million worsened from a loss of $251,000 last year. Most of this change was due to two major factors.

First, $2.1 million of other expense in the first quarter of 2017 related to the extinguishment and replacement of debt and $1.6 million of other income in the first quarter of 2016 related to the gain on the favorable resolution of Irgovel purchase litigation.

Rice bran consolidated adjusted EBITDA of $405,000 in the first quarter of 2017 compared to a deficit or a negative $218,000 in the first quarter of 2016. We were particularly pleased with the adjusted EBITDA of the combined U.S.A. and corporate statements $731,000 positive this year versus $376,000 positive last year.

We think the combined adjusted EBITDA of these two segments will provide a reasonable path for analysis of our company.

The quarter also brought me to improvements in our balance sheet and liquidity, through debt preferred stock and warrant financing we were able to repay and restructure debt in a way that we will reduce our cash interest expense by $500,000 annually.

This also sharply improved our liquidity by helping raise our cash balance to $3.4 million at March 31, 2017 from $451,000 on December 31, 2016. RiceBran Technologies shareholder equity increased to 7.9 million in March 31, 2017 from a deficit of 642,000 on December 31, 2016.

Mainly through the termination of rights held by the minority investor in the Brazil segment. This allowed us to reclassify many of our warrants from a liability to equity. Our shareholders’ equity at the end of the first quarter of 2017 exceeded the 2.5 million minimum shareholders equity requirement for our NASDAQ listing.

We are starting to work to develop greater investor awareness of the changes we are implementing and the results they are providing. Yesterday, Lake Street Capital Markets picked up coverage of our stock and we would like to thank them for their efforts.

We are talking to other sell side firms and starting to tell our story to many of the hundreds of buy side firms that I have worked with over many years in my previous role as a sell side analyst.

We are confident that we are improving the financial position of the company, the balance sheet, the operations, the cost and expense structure and other areas. We are building a foundation that allows us to start seeking growth opportunities in a focused and disciplined way. We look forward to updating you on this in the future.

Robert I will turn it back to you for closing comments..

Thank, Brent. As we move through 2017 we will continue to take the steps necessary to realize additional cost savings in our business, further improve our balance sheet and transition towards both end markets and customers that we believe represent the best long-term growth opportunities to build lasting value for shareholders.

Our whole team is focused on leveraging our strong technology-based in order to become the leading producer of rice bran ingredients. We continue our work to secure consistent bran supplies in the regions where we operate and we are dedicated to achieving the highest standards of quality and food safety for our customers.

We also intend to increase our product innovation efforts to capitalize on growing nutritional trends in the food animal nutrition and specialty product markets to further increase the value of our product portfolio.

We have made substantial progress in positioning our company for success and that progress is just beginning to become evident in our financials. As we make further improvements and grow revenue throughout the year we are setting the stage for additional margin expansion and improve bottomline results.

We are excited about the future of RiceBran Technologies and believe that we are gaining momentum on all fronts as we move through the year. We are confident that our strategy will create significantly more profitable company and drive better stock performance.

We are committed to delivering value to our stockholders and thanks them for allocating some of their capital to RiceBran Technologies. We would also like to thank our employees for their dedication and effort and helping us to continue our corporate transformation.

We look forward to updating shareholders on our progress again in August as we reports second quarter results. That concludes our prepared comments. Operator, at this time, please open the call for questions and please note that we plan to limit callers to one initial question and one follow-up..

Thank you, ladies and gentlemen. [Operator Instructions] Our first question comes from the line of Chris Krueger from Lake Street Capital Markets. Please go ahead..

Good afternoon, guys..

Hi, Chris.

How are you?.

Good. I know you guys have done a lot of moves to reduce expenses which has resulted a big reason for your turnaround in EBITDA.

Can you give us some of the specific key initiatives that have boosted your operating income, as well as maybe some initiatives and maybe haven't yet been fully realized?.

Sure. I think there's a number of areas that the company has put focus on over the last nine months, 10 months.

When the change was first made in the board last summer, there was a substantial review done of basically every expenditure made by the company in the previous two years and from that study several million dollars of cost savings have been identified and we have been rigorously working the last 10 months to realize both cost savings.

So I would say we are substantially into them, but we have a long distance to go yet. So we're realizing some of the benefits but clearly not all them yet. These would include things like focusing on our physical footprint, so reducing -- essentially real estate, reducing the cost of carrying real estate.

From a production perspective it would look at how we are sourcing a lot of our raw material. It look at how we are managing a labor force and it has a lot to do with how we look at the efficiency of our working capital in operating each of our facilities.

From a corporate perspective, Michael, had alluded earlier, we used to go to a lot of conferences and a lot of events and tradeshows and Michael has taken substantial efforts to focus on those that we think will give us the biggest return.

So those are the example of the sort of things we are doing to carve out permanent reductions in costs and make this ongoing more profitable company..

All right.

Then as you get close to really going to market and going after larger CPG type of customers down the road, are there any FDA regulations or how does the FDA define dietary fiber as it relates to RiceBran any issues there?.

Rice bran, just the basic ingredient stabilized rice bran is approved as a dietary fiber, because it's in its original composition and so we have been informed about that.

We are currently going through an additional process of getting some of our derivative ingredients, our value-added ingredients also through that approval process and we are fairly confident that it will be viewed as the dietary fiber has been still the way it is.

So with respect to those FDA regulations, I think, we feel quite confident in terms of we are positioned and of course is all kinds of other FDA regulation that relate more to the modern food safety act and we are certainly working towards updating many of our facilities to be compliant with all the latest food safety regulations..

Okay.

Last question, when you look at the opportunity to sell and do more animal nutrition and human ingredient the food products, what are some of the key market trends that are occurring, you think are good for rice bran and your prospects are?.

So, hi, it’s Michael Goose and that’s a great question for you. So I think I highlighted just a real topline macro trends. Right now if you walk into of your natural food stores, you are going to see more and more self-paced being taken up and a lot of these stores won’t even carry products that don't have it by the non-GMO logger call out.

So you are seeing more and more interest in just non-GMO products. On top of that all another major trend that’s really helping us out has been the reduction of ingredients and we’ve met with numerous large CPG companies and the majority of them have the same initiative of not to get over double-digit ingredients.

And what's interesting about our ingredients is the fact that we have an ingredient that’s not just one nutritional benefit. For example, our products just stabilized rice ban alone has around 20% protein and 20% fiber in it, plus the kind of macro nutrients and antioxidants that you can do as well from that.

So, formulators are looking at our product as a real benefit for them that you can basically reduce your ingredient counting just kill two birds with one stone from the nutritional standpoint.

Now another benefits too, which is really interesting for us as while, it is benefiting us is we are seeing more and more on the beverage side in soluble products be in place and I'm sure you seen a lot of beverages out there with chiya in it and other particles that are coming into it and that’s really helped us to get in the door with a lot of beverage companies, in the past we wouldn’t be able to get into, just because our product outside of our rice soluble which is a great product do not really dissolve well into beverages.

So it’s always been a barrier for us to get in there. Now more and more consumers are accepting seeing particles in beverages, because it’s becoming more and more natural, and that's really been a nice benefit for us to get us in the door and get us fact there. So that’s a couple examples of this trend that have been really helping us out there..

All right. Thanks. That’s all I have..

Thank you, Chris..

Thank you..

Thank you. Our next question comes from the line of [ph] George Johnson (29:20), a private investor. Please go ahead..

Thank you, Robert and Michael..

Hi.

How are you doing George?.

Going good.

And I have -- you get a deal with the organic rice bran, I know that other public records that shows you have got a lot of shipments and from your warehouse, yet you have had another deal announced but organic by nature, what’s that, I don’t think to carry enough any large solid reselling or the organic products and how is it going?.

That’s going great. We are bringing in more ships to increasing a number of ships that are coming in from Thailand with the organic jasmine stabilized rice bran.

As you know we take that up to our Dillon, Montana facility where it gets for the process and some -- into some of the functional value-added ingredients, which are now certified organic, all the way through the process and that's what organic by nature is sourcing from us, because this is something that we have been trying to do for many, many years for their primary product, which is kind of clean vegetable mix and rice soluble are ingredient -- was a primary ingredient and they if not major ingredient, but it was the one that was never available on their organic form.

And so we strive for many years to find that source. We finally got that together. So it does go in and they are doing quite well with that. So we are very pleased..

Yeah. Exactly on their sales..

Yeah. So I -- that program is going well and by the virtue of the fact that we now carry organic stabilized rice bran. I know that Michael Goose has been getting a lot of interest from various customers in terms of availability of that stabilized bran as an alternative to the more conventional stabilized rice bran.

Michael, do you want to comment?.

And George just to comment on that, it’s been a great opportunity to get into organic for us by having such a great anchor like organic by nature, while we tried to find the home and try to find the market for organic stabilized rice bran moving forward and by having organic by nature there to really anchor down and give us some volume going into it, really it allows us to go out there and strategically seek long-term customers and I am sure done and I am sure you heard this.

It just doesn’t happen overnight along the lines of bringing in the new skew and getting it formulated with all that other stuff. So having organic by nature is a great benefit to us and it opens up a whole opportunity for us to become the leader in rice bran and unlocking the nutrition of rice bran as well..

Okay. Then -- my follow-up question had been that in the month of April you received two shipments from Thailand, is that a good sign or is that just politically, is it growing in pretty good percentage anything….

I think that in switching from conventional to the organic side, it always takes some logistics on the operational side and also you working through your existing inventory positions that both companies had. So you're seeing some variations there in the logistics of what's coming now.

I think you'll see that stabilizing grow as we go through the year..

Okay. That’s enough for that. Thank you..

Thank you very much..

Thank you. Our next question comes from the line of Mark Hagen from Oak Ridge Financial. Please go ahead..

Hi. Good afternoon. Thanks for taking my call..

Hi, Mark..

Hi. Hi, Robert.

In the past you guys have worked with DSM to develop rice bran protein ingredients, I am just kind of curious what the status of that program is and if you plan to launch any additional protein ingredients going forward?.

Protein is great. We love protein and protein from rice bran is an exceptional protein, because it have a really positive overall amino acid balance, so it is a key protein, a number of industries are looking for in terms of beverage and sports performance and so forth.

Today most rice bran proteins comes from processing of broken -- rice broken and so forth. There really isn’t much coming out of rice bran per say. It has always been something that has been of interest to us. We did an extensive project with DSM.

We reach certain milestones in that program to the levels of 30% to 35% of the soluble protein peptide, which was exciting.

But I think the industry and the market as a whole is looking for protein that might have slightly higher concentrate perhaps in the 50% range and so we are still very interested in meeting those kind of targets and we continue to look at developing the new generation of ingredients of value-added ingredients from rice bran, one of those of course being something that brings you into the 50% or high range on the protein concentrate.

So, yes, we are interested. We continue to develop technology that will get there and with that of course we look at all kinds of other opportunities to develop value-added ingredients as we go forward.

We believe that rice bran has some unique prebiotic properties and we are looking that that whole developing market of tablomics and micro biomes and prebiotics and probiotics. We think that we are going to have a great fit in that arena. So thank you for your question..

Yes. Fair enough.

And secondly, I am just kind of wondering, if you guys can share anything what your thoughts with the new member to the finance team that capital allocation?.

Yeah. From -- this is Brent Rystrom. From a simplistic perspective, we are in the process of creating kind of capital budgeting and allocation process. And so, when I am looking at it my first couple of months here, there's really three levels of what I would call are critical steps for allocating capital.

The most important is going to be safety-related things. So has anything to do with FISMA or getting certification. Those are things that we just have to do to keep up with standards for where the food industry is moving. On a financial perspective, if it's outside of that and things that we electively can do as opposed to regulatory have to do.

We are looking at the two ways, on small scale investments we are looking for generally returns in half year to two-year sort of timeframe. So if we invest the dollar we like to get the dot which earn on that dollar of that fold out within two years. On larger longer term projects we are looking anywhere from two year to four year returns.

So, anywhere between a 25% and a 50% annual return on CapEx is kind of what we are targeting.

Does that help?.

Yes. Thank you.

And then just kind of lastly sort of the lose question with your background, any thoughts on the recent Waldi report that may be impacted may at your business?.

Yeah. I think that’s a good question. I think people look at the Waldi problem yesterday. They might have scratched their heads a little bit and so from the simple perspective, I think the easiest thing to say when -- it would have Robert give an overview of rice bran, how little rice bran is actually utilized out of the supply globally.

If you can kind of give a quick step through that process..

Yeah. I mean, just broadly speaking, you are looking production of rice bran on a global basis anywhere between 70 million and 80 million metric tons globally on an annual basis.

Of that about 10% is directed towards production of rice bran oil, so that raw rice bran gets expanded and it goes in hexane extraction for rice bran oil, probably 1% or less of that total volume of rice bran that’s produced annually goes back into the food chain for ingredients for human consumption.

Now the bulk of it is probably quickly disposed of in feedlots for animal, if it doesn’t make it there in time you feed the animals that that’s be disposed at another matters, but it doesn’t make it back into the fetching. So the capacity is huge.

So Mark from a simplistic perspective, because I think I know what you're probably looking at, when you look at the reduction in the acreage in yesterday's Waldi I think it was 500,000 acres or something. We are just using a tiny fraction of the rice bran that comes out of the acreage, so volatility in the increase is not impact us too much.

The other thing I would note is you probably watching some of the flooding in Arkansas, the last I saw there is an estimate that might be 100,000 acres lots there because of the dyke system breaking down and then not being able to repair that and trying to save this year's crop.

So from a sourcing perspective, we are heavily focused in two geographic areas. We are in the Sacramento Valley in California and then we’re very much Gulf Coastal in Louisiana. So we are not really exposed, if you're referencing at all the flooding in Arkansas.

And then really it wasn’t in Waldi but from a simplistic perspective, I think, overall the shift in acres looks to be reasonably healthy for where we need to see a combination of both the long and medium grain rice.

So I think we are feeling comfortable with where the reproduction side of the market is this year, but I think the overall theme is, we are not really exposed to the volatility of the acreage, because so little of this is converted..

That makes sense..

Okay. Thanks for the question….

That’s all for me. Yeah..

Thank you..

Thank you. [Operator Instructions] Our following question comes from the line of [ph] Harry Goldsholf (40:13), a private investor. Please go ahead..

Hi.

In past years you've said on the call that you were able to sell all the oil you could produce in Brazil and is that still true and also why is it been unable to establish any kind of a retail market for RBO in the US, when it looks to be a very hungry market?.

The oil that is being produced in Brazil facility today, it is being sold, so they are moving all of the oil.

There is also needs to be a discussion about different forms of the oil, so initially they make a crude rice bran oil and that get’s refine to different levels all the way up to refined oil and they do have a refined oil in the market in Brazil.

We have not brought the rice bran oil up into the U.S., Brazil does sell some of the refined oil on a global basis and in the past they have sold to companies in the U.S. who have rebottled the oil into finished product that go out into the market in U.S. But we are a B2B company.

We are not a B2C company and we don't have a product in the retail in U.S..

Okay.

And then are you planning on consolidating the Dillon location or is there strategic reason why that should maintain our organic cost reduction and then also the -- in the past you had a -- you've done research and testing and coatings for fried food that showed dramatic reductions in the caloric intake and I am wondering why that is died and nothing is ever happened with that?.

Hi. This is Brent Rystrom. I will start with the question about Dillon and then Robert will handle your second question. We are in the process of reviewing all of our operations to see what functionally and financially make sense. Dillon has substantial capital investment in it.

It's a profitable plan for us and we are going to analyze what the best way for us to do that process. We don't have a conclusion on what that analysis is at this point but we're going through that process..

This is Robert Smith.

With respect to your other question relating to the coatings to reduce fat uptake into fried products, that technology is based on the use of defatted rice bran that comes out of our Brazil operations, due to a lot of the interruptions that we've had over the past year, year and a half and the insecurity of being able to bring that product up into the U.S.

it's made a very difficult for us to work with some of our customer base to get them confidence that we would be able to deliver on a regular basis. And so those kinds of studies have kind of been put to the side for now.

It’s still something that we may look into in the future, but a lot of that depends to on the supply of defatted bran that was coming from Brazil. It's not really a technology that works with the full fat bran that produce in the U.S..

Yeah. What would prevent you from bringing some of that equipment from Brazil back to the U.S. and so you could produce that in the U.S..

Right now we are focused really -- our main focus right now is to sell all of the product that we manufactured here in the U.S. The full fat bran and the derivatives that come from that, I think, we have a huge task ahead of us in just dealing with that.

The markets are huge and we think we can make significant progress there, if that's something that is valuable in the future, so we would consider it and look at it, but that's not our main focus at this time..

Okay.

And then one last question, I see that, you folks have approved the potential reverse split of the company’s stock if necessary and I'm wondering is that imminent since the last reverse split you did the stock went from $12 to $0.89 in that very short period of time and typically they're not very healthy?.

Yeah. This is Brent Rystrom. So we had two issues with NASDAQ and the $1 minimum bid requirement is one of those. So from a logistical perspective we have until September 7th to demonstrate that our share price will be at $1 higher and it has to do that for 10 consecutive days.

So from the management perspective, we're focused on running the business, trying to create good results and the working with investors to help them understand what our business is.

If we get to a point this summer where we don't feel that we are going to make the $1 bid requirement, we will do a reverse split, but we will do it in a fashion that gets us over $1, but does it without overwhelmingly cutting the share base. I'm not so worried about the share price. What I am focused on is the share liquidity.

So we can do this without having to split we would prefer to do it, because we would like to maintain the trading volume we have now, and of course, if we do a reverse split in theory that cuts our trading volume..

Okay. Thank you..

Thank you very much..

Thank you. [Operator Instructions] Ladies and gentlemen, it appears we have no further questions in queue at this time. I'd like to turn the floor back over to management for closing comments..

Thank you, Operator. And thanks to our shareholders and investors for joining the call today. This ended the call. Thank you very much..

Thank you. Ladies and gentlemen, this does concluded our teleconference for today. You may now disconnect your lines at the time. Thank you for your participation and have a wonderful day..