Richard Galterio - Ascendant Partners, IR Robert Smith - President and CEO Michael Goose - President, Ingredient Sales and Marketing Brent Rystrom - CFO.

Chris Krueger - Lake Street Capital Markets Paul Sonz - Paul D. Sonz Partners Harry Goldsholl - Private Investor.

Welcome to the RiceBran Technologies’ 2017 Third 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. It is now my pleasure to introduce your host, Mr.

Richard Galterio of Ascendant Partners. Please go ahead Mr. Galterio..

Thank you, Operator and good afternoon listeners. Welcome to the RiceBran Technologies’ third 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.

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 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 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, November 09, 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..

Thank you, Rich. Good afternoon and thank you for joining our conference call for the third quarter of 2017. Our operational performance in the third quarter provided meaningful progress in many of our initiatives. Third quarter growth was up 6% compared to last year on revenue of $3.5 million.

We experienced a solid growth of 13% in our animal nutrition business while growth in food ingredient revenue was healthy and most areas except in our specialty ingredients.

Animal nutrition growth was mainly driven by successful efforts in further penetrating the equine feed market reflecting our successful partnership in building this segment with our marketing partner Kentucky Equine Research.

We anticipate that our revenue from the food while show accelerating growth in the near future as RBC has markedly improved its financial position and it sales making up the strong ingredient partner going forward. We're encouraged with some of the many opportunities we are currently pursuing in this space.

Importantly, increases in gross profit dollars was accompanied with an improved gross profit margin of almost 800 basis point and with SG&A expenses down over 20% for the period we believe we are making solid progress towards sharply reducing our Adjusted EBITDA losses.

We successfully executed several of our strategic plans of short term objectives and that narrowing our focus to our core ingredient business whilst exiting our non-core businesses. Early in the quarter we sold healthy natural business for $18.3 million which allowed us to eliminate debt in our U.S.

based business and sharply improve our liquidity and shareholders' equity. Eliminating our U.S. based debt was critically important to RiceBran technology as the debt has highly restrictive covenant that sharply limited our ability to manage and grow the business.

One example of this impact is felt in marketing where immediately after limiting the need the debt we expanded our senior sales rights.

During our second quarter earnings call we announced our intention to divest our investment in neutral Nutra, SA which owns Irgovel located in Brazil and finally in September we announced the Continental Grain investment in RiceBran Technology of $2.9 million in exchange for approximately 16% of RBC's outstanding shares.

This important investment further improved our liquidity and shareholders' equity. We're delighted with the Continental Grain's investment and RiceBran Technology from multiple perspectives.

Most importantly for the capital provided in the market awareness along with access we hope to realize from partnering with this exceptionally respected and connected company. We are also making progress achieving milestones in our strategic plans long range objectives.

We recently saw [indiscernible] for our new facility in West Sacramento, California, that will more than double our footprint in that market greatly expanding our inventory capacity and providing many opportunities for efficiency improvements and operational enhancement.

Importantly our new facility was built to food industry standards which will help us reduce the cost and time necessary to achieve our certification efforts. We plan to fully shift our operations from our current location in West Sacramento to this facility by the end of the year.

We're also working extensively with our current and prospective partners and the rice milling industry both in California and in the delta region to secure long term brand supply. It is important to us to remain a strong and reliable partner in the rice milling industry.

We're excited to realize benefits from the expansion and addition we have made to our sales team and Michael will be discussing this in further detail when he comes on in a minute.

We're currently in discussions with dozens of possible culture opportunities spread across our animal nutrition, food and specialty area and we're looking forward to updating you on our progress in these efforts.

We've also been continuing with change of on our Board, with a background of our Board members increasingly aligned with our corporate focus on food and agribusiness.

The vast majority of our Board is now comprised of members with extensive food and agribusiness background, most recently exemplified with the addition of Bob Bucklin this past September.

Bob brings -- recently retired as Vice Chairman of North America for Rabobank bringing visibility and responsibility for most of the food and agribusiness industry and he now serves on a variety of food and agribusiness related boards.

Also the appreciation of our share price allowed us to satisfy NASDAQ's $1 minimum bid requirement during this past quarter.

Finally before I turn the call over to Michael Goose to provide an update on our sales and marketing effort and to Brent Rystrom who will provide a more in-depth analysis of our third quarter performance I would like to thank our shareholders for their investment in RiceBran Technologies.

We're focused on value creation and appreciate their investment. I would also like to thank all of our employees for their successes that they are starting to create for the company. With that I'd like to hand it over to Michael.

Michael?.

Thank you, Robert and hello to all. I'm excited to talk about the progress we are making in building our sales and marketing efforts, building awareness of our products and working to combine the drive accelerated and meaningful revenue. As mentioned in the past our goal as an organization is profitable and sustainable revenue.

Our sales and marketing efforts are seeing direct benefits as a result of our improved balance sheet and our Board and management make over. We are now perceived by customers and potential customers as well-capitalized, focused and executing successfully on our plan.

During the quarter we made two important additions to our sales team that we believe will help us build customer base and marketing efforts. Kevin Mosley joined RBT as a Senior Vice President of Sales and Marketing and Mark Ritter as Eastern Region Director of Sales.

Kevin and Mark bring extensive experience and access to the food an ingredient industry with their combined resume including success at companies like Celanese, The Hain Celestial Group, Conagra Brands, PepsiCo Foods USA and SunOpta.

With these hires in our existing talents we're structuring our sales and marketing efforts to strategically focus on categories where we feel RiceBran provides the most value.

These categories include equine livestock feed, companion animal, better for your lifestyle, fiber, snacks, bakery and meat, our target in these categories include large CPG companies, third party innovation companies and companies viewed as disruptors. We believe category focus will help us penetrate the above identified segments.

The functional focus on customer types has positioned us better to pursue growth. Recent wins on this include a new distributor relationship, our RiceBran being [indiscernible] brand in the gluten free space that we expect to see on store shelves in December.

A first order from a companion animal company in September and initiatives in the agricultural markets. We're also exploited by all the [indiscernible] we have in the fire. We think our successful and established presence in the animal nutritional market provides an attractive and near term opportunity for us to preserve sustainable revenue growth.

The intermediate timeframe will provide us plenty of opportunities to grow in areas like supplying whole grain flour producers, baked goods, snacks, meat inclusion and other similar products and we are also excited about our long term opportunity.

It is no secret that consumers are becoming more aware of what they are eating and becoming more aware of the ingredients in their foods, this is causing major trends like clean label, gluten free and non-GMO. RiceBran as an ingredient meets all these growth trends and this has been driving factors in our numerous opportunity.

With the tailwinds from these trends we are starting to see interest from large CPG companies and we are running pilot test in many of these key categories mentioned above including better for your lifestyle, snacks, bakery and meat inclusion.

In other areas where we are in the early stages of looking at several new opportunities for stabilized RiceBran and although we are just in the exploratory stages on these we are excited by the large market potential of some of these may bring to RiceBran Technology I will now turn the call over to Brent Rystrom..

Thank you, Michael and my thanks as well for those joining this call. In my portion of the call I'm going to provide an overview of our performance in the third quarter and some thoughts on our plans for growing the business.

In the third quarter we posted revenue growth of 6% with animal nutrition posting growth of 13% trued up 1% with food being constrained by weak orders from some specially ingredient customers.

Our gross profit in the margin -- our gross profit margin in the quarter of 33.1% improved nearly 800 basis points from last year with the change being driven by better absorption, lower brand prices, a continued focus on cost reduction and other items.

SG&A expenses totalled $2.495 million and declined 20% from $3.140 million last year driven by lower occupancy costs in both Scottsdale and West Sacramento, expense reductions in many initiatives to further reduce spending. We reported an operating loss of $1.355 million in the third quarter compared to $2.325 million last year.

Our adjusted EBITDA in the quarter was a loss of $922,000 versus an adjusted EBITDA loss of $1.228 million last year with the improvement suppressed due to accounting and other fees associated with our sale of healthy natural, higher accruals for bonuses and higher inventory reserves than we had estimated.

As a reminder we have classified Nutra, SA as discontinued operations and our current pursing means to exit that investment. Our actions in the third quarter strengthened many of our balance sheet metrics, we ended the quarter with $8.187 million of cash and cash equivalents.

We also had $775,000 of restricted cash in escrow related accounts related to the sale of healthy natural. We eliminated almost all of our U.S. debt in the third quarter except for $32,000 related to equipment capital leasing.

Our shareholders' equity totaled $12.392 million at the end of the quarter up from $6.860 million at the end of June 30, 2017 and a negative $632,000 at December 31, 2016. RiceBran Technologies is now reasonably capitalized and liquid putting us in a strong position to pursue our growth strategy.

Over the next few quarters we plan to make considerable progress in establishing the base for a substantial growing RiceBran. As we enter early 2018 we believe in annualized rate [ph] revenue run-rate of $14 million implies an annualized EBITDA run-rate somewhere near a negative $1.5 million to a negative $2.3 million.

Our analysis tells us that we need to increase our revenue to approximately $19 million to $22 million to improve our adjusted EBITDA to breakeven.

The targeted revenue range that we just said of $19 million to $22 million will be reflective of mix with more sales needed to reach breakeven, the heavier the sales mix is sure to our animal nutrition area versus food. Our goal is to achieve positive adjusted EBITDA in 12 to 24 months. We are focused on a few key areas to achieve this.

First, we are working to improve our grain supplies to existing mill partners and by securing additional mill relationships. Second, and in tandem we are working to increase our sales with new and existing customers. We see several new customer opportunities that could combine over time to sharply grow our sales.

Third, we are pursuing several long term transformational customer opportunities where the revenue potential could be significantly higher compared to our historical success. We want to grow our revenue considerably as 2018 unfolds and hope to meaningfully reduce our adjusted EBITDA losses by the end of the year.

Internally we are focused on closing this GAAP on adjusted EBITDA as quickly as possible, hence our focus on growing the business with existing new customers. Cost headwinds we're facing on our model are mainly related to brand cost which have been trending higher in both California and Louisiana since the quarter ended.

These tend to have some volatility and some seasonality but we will have to monitor these changes carefully determine if we need to take actions where possible to offset some of these higher costs.

Our base CapEx in 2018 will total about $800,000 and we will likely have two long term CapEx projects schedule for the year that will cost somewhere near $2 million, it is possible that additional CapEx to be needed as new responses and growth initiatives in both sales and production.

That ends the prepared portion of our conference call and we would now like to turn it over to the Operator for question and answer session.

Operator?.

[Operator Instructions]. The first question is from Chris Krueger of Lake Street Capital Markets. Please go ahead..

Good afternoon, guys. Brent you just finished stating that your brand cost have been trending higher, it sounds like in the current quarter.

So looking at gross margin you know for the next couple of quarters it was well ahead of my estimate of third quarter by [indiscernible] can you tell us where that might go?.

Well I think its premature to get to too directional on it, what I would tell you is the margins in the quarter just ended probably started off stronger and then weakened a little in September. I think it will probably be prudent to consider that December will be not necessarily the improvement we saw in the September quarter.

So I would look at something to trend a little bit lower at this point for fourth quarter margin..

Okay, got it.

Then looking at your just your opportunities equine, companion pet, can you kind of quantify how big those opportunities are and whether you've got a pipeline of potential either new customers or new business of existing customers in those areas?.

Well Robert why don't I take that one quickly and then Michael can jump in..

Sure. All right..

From a simplistic perspective I think you've summarized it well.

We've got a couple of paths to grow the business, I believe the most successful area that RiceBran operates and currently the most historical success as far as building out the businesses is servicing the equine market and I think that's probably going to be a very good path for us to pursue opportunities this next year, there is a lot of science, there's a lot of history, there's a lot of relationships and I think that will lead to meaningful and many opportunities to grow the business.

There are a couple of other is that I think have near term and intermediate term opportunity I think we've got some good access particularly with Michael and his team into the companion care market, so basically dogs and then I think Michael and his team has some maximum opportunity with that many different things starting right now with different food ingredient opportunities.

So the easiest path is going to probably be to build into the horse [ph] business, follow that with the two areas and build over the year. From a science perspective right now we're doing about $6 million a year in revenue in basically our animal area, Most of that large majority of that is related to equine.

We think in the English style equine market we may have, 1/3rd market share, maybe a little more, maybe a little less and we think as the market builds and awareness builds there is a substantially large market into the Western Horse market as well. So that gives you a kind of sense just the equine we can grow the business substantially..

Okay, got it. Just one last question, I know a lot of customers, protected customers are in the kind of center part of the country and we know that Arkansas grows a lot of rice.

I mean is there potential for a supply agreement in that region?.

Hi, this is Robert Smith. You're absolutely correct. I mean we look at Arkansas as certainly a very important part of the region not only in terms of just the volume of rice that’s grown in that region but also proximity to some of our customers in the center of U.S. on the east coast.

As we have stated not just on this call but in previous calls, we have been very active in courting a number of mills both in California but also with the delta region and that includes Arkansas in terms of building our brand security going forward and I'm happy to say that we certainly have done spending quite a bit of time in the Arkansas region, so we see that as a potential region for our continued growth in the future in terms of securing some brand surprises, distributing to customers in the east coast..

All right. Good luck wrapping up the year and that’s all I got..

Thank you..

Thanks, Chris..

[Operator Instructions]. The next question is from Paul Sonz, Paul D. Sonz Partners. Please go ahead..

Sure. Good afternoon.

I just want to know what is the sensitivity of customers to [indiscernible] price of bran?.

Brent, do you want to start with that?.

Yes, I'm sorry Paul could you repeat the question, I didn’t hear it..

I'm sorry.

Okay, well it's basically that how sensitivity are customers to changes in the price of bran? So if your bran price goes up so does [indiscernible] bran just went up 5%, does that raise your price 5%? Do they get instead of -- a game changer for them and they see -- that’s too much or is utility for the customer of bran such that you're not that sensitivity to changing the price..

I think reasonably the first thing I should probably say is there is volatility in bran prices. They are all over the map in the course of a year or so. We're not actually seeing, we see a huge problem developing or that we have to respond.

We're just noting for people right now that bran prices are seasonally it's a little bit higher, we're watching and we will react accordingly if we have to. As I think from a philosophical perspective the issue you would have with bran prices is bran is like everything else in the food and agro business area, it’s a substitute for something else.

So you got protein, you got fiber, you got all these things that our product brings and it has to be priced relative to what other substitutes are available for and so if we see bran pricing was higher and corn, beans, wheat whatever don’t work the same way, they work the opposite way that’s going to make our job more difficult if we have to raise prices.

So right now, you're not in an environmental where you're seeing corn or soybean working [ph] higher. You've got fairly robust supply, you've got a declining carry-out on corn probably coming up for the full year, global stocks for beans and corn are shrinking but we're in no shape really to say it’s a tightening market.

So right now I would say we would be limited in what we can do based on where the substitute markets are. Now having said that its just depends where we are 2, 3, 4, 5 months out if it develops being an issue..

I just wanted -- the contract that you've with -- that you've a long term relationship in the equine market with that company, to what extent you have the contracts built-in the ability to adjust prices?.

We don’t talk about specific customers or contracts..

Okay. All right.

Next question, what drives the bran higher? Because you've—I mean it seems like it's a product that not a lot of people useful and most of it's on the way, so what would drive the price of bringing up [ph]?.

Right now we're seeing a fair amount of export activity and when I say a fair amount it's still a small amount to the overall brand supply, but you're actually seeing mills that are located in areas that have ocean shipping capabilities, you're seeing bran actually been put in containers and shipped overseas for sales overseas markets..

If bran goes [indiscernible] within an hour, how is that possible?.

We're not quite sure but there is a market right now for it and that’s having a little bit of an impact on rice..

Let me just add to the commentary that it's not the case that bran prices are increasing throughout the U.S. I think we just spoke a minute ago about Arkansas for instance and we're not seeing an increase in bran prices in Arkansas.

Part of our strategy is diversify locations where we still are strong, we will be able to handle these fluctuations that are state by state going forward. So now we certainly are looking at our overall strategies, our planning, how we source the bran and secure and if we can accommodate these changes going forward..

Great. Thank you very much..

The next question is from Harry Goldsholl, Private Investor. Please go ahead..

Hi. Good afternoon.

Is it correct to assume that you totally have walked away from the Brazilian operation at this time?.

We certainly bring it down, but Brent but how would you want to answer that?.

Yes, I would say what we have done is we have classified results of discontinued operation and what that means is that we intend to exit that business within one year of when we made that designation which was at the end of the second quarter. So we're looking at possible ways to explicate ourself from ownership of [indiscernible]..

Okay, so it's not generating anything for you at this time?.

I'm sorry Harry, you said it's not what?.

Is it not generating any revenue at this time?.

No it is generating revenue, the company is producing, it's functioning, it's operating but it continues to operate at a fairly substantial losses. So if you've a copy of our 10Q or you want to look at it later go to page nine of our 10Q and a couple of highlights, it had revenue of $3.226 million in the quarter versus $563,000 last year.

It had a loss basically from operations of $2.200 million versus a loss last year of $1.5 million and then it had a reported loss of $2.2 million versus $1.5 million last year. So the business is operating but it continues to lose money..

Yes. I didn’t see that 10Q being released prior to the call, so I didn’t see that..

And the Q will go out later today or possible tomorrow but usually it's within a few hours of the call, when you look at the income statement the only area it shows up there is discontinued operations it's in that line..

Let me make it clear, we committed to not putting any additional puts into Irgovel for operations and we have said that statement throughout the year and we remain committed to that..

Is any of the equipment there suitable for your current plans moving forward to expand and maybe distribute it to various locations closer to the source of bran or is that basically not worth shipping back here or do you not even own it any more?.

Yes. Technically the equipment is owned by Irgovel and Irgovel is owned by Nutra, SA and we own a portion of Nutra, SA so that equipment would have to be if there is equipment we want it then we have to come to an agreement to get that equipment..

All right. You mentioned that there is a -- you opened a new facility in Sacramento that's bigger and better and modern, more modern. Are you doing anything about consolidating the multiple locations that you've versus the cost of just simply continuing to expand seemingly way beyond the current needs..

I will take that question. We are moving into a facility that one is structurally built the [indiscernible] facility which is very important in this day and age when all food processors need to comply [indiscernible] compliance and certifications and that helps us in my respects in terms of food safety and quality.

Beyond that we see this facility enabling us to take on some of the operational activity that are currently being done at other mills for us, that allows us to reduce some cost on our operations and more importantly it will improve with the quality of the product set we produce because we have more say in operational oversight over that production.

So the facility will not only duplicate our and expand our current warehouse and distribution facilities but more importantly it also allows us to take charge of more of the process and control the quality of the product that we make..

Okay.

Then are you still operating in Arizona, in Montana, and in Louisiana or? Those areas have been consolidated?.

We're consolidating the activities that happen in Arizona are being consolidated into office space in Houston, and some of it into new facility in California. That’s happening as we speak and we hope to have that activity completed within the first quarter of next year..

Why are you in Houston?.

Houston, again as we said in the past we believe it's important for RBT to have a significant foot print in rice country and Houston is rice country in the delta region where a number of mills located within the Houston area and in another way in for Louisiana, Arkansas [indiscernible]. So Houston is important to us going forward.

We have met with a number of mills in that area. So Montana -- go ahead..

No, I was going to say in the past I'm just sort of jumping around to a new topic, in the past the equine animal nutrition area was set to be a very low profitability area and thus it was the reason why the company had pretty much abandoned it and now it seems to be the primary focus, how would you address that?.

I don’t think that equine was ever something that we wanted to abandon, we already [indiscernible] on business and we certainly have our significant market share and we're very prominent as one of the leading rice bran companies that provides that ingredient into that marketplace today. The opportunity for growth is definitely there.

We have always I think in the past talked about the significant opportunities that also exist within the food ingredient market and the speciality ingredient market.

So yes I'm very excited about the other opportunities with our margin, but we never really discounted the opportunities that exist in the animal market but more than that what you need to understand that those customers, that customer base that we're selling into in equine, a lot of those companies also have divisions that are very significant with respective companion tests and so we already have inventory [ph] and discussions with our current customer base in equine that can lead right into the companion set.

So we're quite excited about what we can do in terms of growing the equine but at the same time that leads into growth on the companion set..

Okay. As you may realize my primary goal here is to try to figure out what you guys are going to do to increase shareholder value because its abysmal.

People have purchased warrants in the past, they are going to wind up having them expire worthless and I don’t really -- I'm not excited about what you guys are doing yet and so what can you say to make me as an investor who invested significant amounts of money into your company excited about what you're doing..

Well I'm extremely pleased, I think we're in-line, and I've seen a lot of changes within the last year and perhaps that's not usually seen by the [indiscernible] in general but I can tell you that I'm extremely confident in the people who work in this company have seen key change everything we're doing and I can tell that that extends down to the rice millers, and a lot of our customer base today.

They already appreciate the changes that we're putting in place and understand that this is not something results in overnight growth and revenue growth but we definitely are putting the building blocks in place and I can tell you there is significant interest not only on the animal side but there is significant interest by major food companies, the CPGs and what we're putting in displays, the ingredients and [indiscernible] incidence with their product development is going forward.

I think one of the gating items in the past was certain degree of unsinked [ph] security in terms of our ability to continue as a company give our favourable balance sheet.

Now that that’s been impaired so much by the position to go out there, put our ingredient into product development and there is a lot of confidence among that customer base that we will be able to provide going into the future not only from California but as we develop our brand security in the delta region that we will have multiple locations to be able to supply them from that makes sense.

So I understand that it's not an immediate turnaround in terms of the revenue growth but from where I sit here today the change from a year ago is extensive and I feel very confident that we're on a good position to really grow the business..

Okay, and lastly are there any plans to or maybe you've but we don’t know expand into the retail marketplace where the margins are significant for products like the oil that you at one time produced and may or may still be doing..

It’s Michael Goose is going to answer this one. There is always in the back of our mind plan. Our short term plan right now is to build as much focus on the ingredient side of our business and devote our entire energy and resources overall to that part. So you know in the short term there is no real retail brand focus.

Once we can prove that from the ingredient side we're showing some great momentum there than possibly but you know in the next 12 months there is no strategy towards going after retail and the reason behind that one is the cost to go after retail is extremely significant, two, is we feel that our lowest hanging fruit right now in the ingredient side and that’s where our business is setup there right now..

Okay, very good. Good luck..

Thank you..

[Operator Instructions]. There are no further questions at this time. This concludes the question-and-answer session. I would like to turn the conference back over to Dr. Robert Smith for any closing remarks..

Thank you very much and thank you again all listeners on the call today. We very much appreciate your time and interest in RiceBran Technologies and we look forward to reporting on our successes on our next call. Thank you..

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..