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

Chris Krueger - Lake Street Capital Markets Anthony Vendetti - Maxim Group George Johnston - Private Investor.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the RiceBran Technologies’ 2017 Yearend 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'd now like to introduce our host, Mr. Richard Galterio of Ascendant Partners. Please go ahead, Mr. Galterio..

Thank you, operator. Good afternoon, listeners. Welcome to RiceBran Technologies’ 2017 Yearend Financial Results Conference Call. With us today are Dr. Robert Smith, Chief Executive Officer and President of RiceBran Technologies; Brent Rystrom, Chief Operating and Chief Financial Officer; and Michael Goose, President of U.S.A. Ingredient.

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 including estimates as of today, March 15, 2018 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 and welcome to all. Thank you for joining us for the RiceBran Technologies 2017 fourth quarter conference call. We accomplished much in 2017 to position RBC for future success. We completed a financing in early 2017 that provided RBC some time to get our financial house in order.

We were then able to sell Healthy Natural, our contract blending and packaging business using the proceeds to pay-off our U.S. based debt and replenish our cash balances and shareholder’s equity. This was followed by an investment in RBT from Continental Grain, adding further strength to our balance sheet.

And late in the year, last year we exited our investment in Brazil; eliminating any further losses in this operation. As we focused our operation and fixed our balance sheet in 2017, we have set the stage to start growing the business.

On the sales and marketing side, Michael Goose will shortly give you detail on our efforts and some of the progress we are making. Michael now has a sales team that is functionally focused on key categories like; companion pet, lifestyle, equine and feed and protein.

We're excited about the opportunities we are seeing and starting to win as a result of these efforts. We are also working to make sure our operations are ready for growth. We are updating our facilities to meet FSMA Standards and attaining SQF Certification. We expect to have important progress on those efforts as the year unfolds.

To best ensure our certification, we started making a series of quality and operational improvements starting in 2017 and into this year, combined with significant CapEx investment.

Major projects include; leasing a new food grade distribution facility in West Sacramento in late 2017 that will also provide us the ability to substantially increase production of our mills products.

Additionally, we have CapEx and equipment and facility improvements to our Dillon Montana facility and enhancements to our warehousing and logistics capabilities in Louisiana. We are also working on expanding our brand supply. Especially, focusing on the Delta region of Arkansas and Louisiana where nearly 70% of the U.S. rice is produced.

We've also initiated R&D project to add new and improved products to our portfolio. And during the second quarter, we plan to open a new headquarters office in Houston, putting our corporate office near the bulk of the U.S. rice production. We believe these efforts will translate into meaningful growth as 2018 progress.

Despite a fairly long sale cycle with new customers, we have several new customer wins already in 2018 that will start to deliver meaningful growth in the second quarter of this year. We are confident that we will add major additional customers as the year progresses which should accelerate our growth rate.

I'd like to now turn the call over to Michael Goose for his update on sales and marketing.

Michael?.

Thanks Robert and good afternoon, to all. I am excited to share with you today some successes we are starting to see as a result of our sales initiatives at RiceBran Technologies.

We spent the second half of 2017 strengthening the sales team with key additions to help us in companion pet and protein, augmenting our existing sales strength in areas like lifestyle, bakery, cereal and breading and equine and feed. Now that we have a strong sales team in place, we plan on adding only 1 to 2 additional sales people in 2018.

We have been working on improving our sales support in addition to growing our sales team. We’ve recently launched an improved CRM effort and we are going to use the CRM to help drive better company-wide planning through things like sales funnel planning reports.

We are also updating our website soon and recently issued new Sales Chief to help ourselves team and marketing efforts and we have been optimizing pricing and volume opportunities to be more consistent and inline. As I mentioned in these efforts are starting to produce results.

Some examples of this are; one, despite the financial pressures we had from March of 2017, we were still able to regain an important companion pet and lifestyle customer. In the back half of the year as part of an initiative we discussed several quarters ago on returning them - bringing back past customers.

We have secured and we'll start shipping in the second quarter to an expansion opportunity with one of our customers in the bakery segment. Third, most recently we added an important new lifestyle customer to our specialty ingredient. Fourth, we have been inspecting to a gluten-free tasting product with a new customer that starts to ship in June.

And fifth, we – all our partners have participated in many innovation days at some leading major food companies, leading us towards some new customer opportunities. We expect revenue growth to accelerate sequentially as 2018 unfold as our typical yearlong selling cycle is starting to provide us visibility for this growth.

We are making progress on many new customer initiatives and expect to add further wins throughout the year, including numerous of opportunities that have gone from the exploratory stage into pilot.

In addition, we are working with industry experts to develop a go-to-market strategy for some key areas require technical expertise beyond our capabilities. We just attendant Expo West in Anaheim and came away pleased with our activity. Expo West is one of the largest natural food shows in the world with over 80,000 attendees.

Key decision makers in the food, supplement, companion, animal and personal care spaces learns new innovation and trends at the show. We located our business in a different location this year and that area fabricated to new and disruptive food company and the change in locations saw strong and exciting traffic.

We have meetings with dozens of major potential customers and we are seeing increasing traction in our efforts with many of them.

I would now like to turn the call over to Brent Rystrom to provide a financial update Brent?.

Thank you, Michael. I would like to start by expressing my excitement over the progress we are seeing from these sales efforts at RiceBran Technology. The scope of activity and the opportunity for Michael’s group has been mushrooming in the past six months. This is causing some challenges in good ways for the company.

We have visibility for several new customers that will require substantial increases in production in several of our products and locations. We are planning production carefully to avoid some possible near-term bottlenecks in production due to growing demand for a few other products.

When combined with CapEx project, adding more ground supply and certification efforts, it's going to be a busy year for us. RiceBran Technologies posted modest revenue growth of 3% in 2017 to $13.4 million from $13 million.

We believe our performance in 2017 was negatively impacted by the difficult financial condition reflected in our balance sheet for much of the year. We started the year with highly stressed balance sheet, something we successfully repaired in the third quarter through the July sale of healthy natural and investment by Continental Grain in September.

We believe our financial condition limited new customer growth opportunities for us until we improve our finances simply because we were too risky for most and customers to work with. We improved our gross profit both dollars and rate as we get more efficient at running the business.

Gross profit was $3.8 million compared to $3.1 million in the 2016, while gross profit margin rate was 28.39% versus 24.09%. Raw bran brand prices were a favorable impact for much of the year while obsolete inventory cost also fell. We also substantially reduced our spending on SG&A.

Our total SG&A spend in 2017 with $9.9 million compared to $12.4 million in 2016. Our annual meeting costs were lower when compared to the proxy contest that we had in 2016 and we drove lower spending on payroll, travel and entertainment and marketing.

We think our SG&A is now close to a level that will be maintained going forward with few additions, mostly focused on sales compensation that will reflect the growth we are expecting. Our loss from operations narrowed to $6.1 million in 2017 from $9.3 million in 2016 and our net loss was $5.3 three million versus $9.1 million respectively.

Our adjusted EBITDA of $4.1 million for 2017 was improved compared to the $5.4 million in 2016. Our 2017 fourth quarter provided revenue of $3.1 million versus $3.2 million last year. We were expecting flat sales, customer training and unplanned downtime both impacted the quarter.

Gross profit margins in the 2017 fourth quarter improved over 300 basis points to 21.15%, helped by lower obsolete inventory cost, which was modestly offset by higher raw bran cost during the quarter. SG&A expenses decreased nearly $500,000 with lower stock option, bonus, office and fee expenses driving most of the decrease.

For the 2017 fourth quarter we reported adjusted EBITDA $1.3 million compared to $1.7 million in the 2016 fourth quarter. Our 2017 fourth quarter adjusted EBITDA reflected our higher spending on sales and marketing, in the quarter that Michael had mentioned earlier and we expect to maintain higher spending in this area in 2018.

This will reflect both a larger overall headcount in sales and compensation that reflects growth in our revenue. RiceBran Technologies is now in a much better position to execute our strategy.

We ended 2017 with cash and cash equivalents of $6.2 million compared to 342,000 at the end of 2016 and over the same period, we reduced our debt to $16000 to $9 million and increased our shareholders equity to $14.7 million from $632,000 negative.

We're also starting to realize meaningful warrant exercises, adding cash and capital to the enterprise since the year ended. We are issuing 2018 guidance for RiceBran Technologies. Some of our key thoughts include; first, we believe we will generate revenue of at least $16 million.

Second, some quarterly revenue though, we expect year over year revenue to be flat to down 5% in the first quarter, up 7% to 12% in the second quarter, up 20% to 30% in the third quarter, and up at least 30% in the fourth quarter.

Three, on revenue of $16 million, we would expect an adjusted EBITDA loss of between $3 million and $3.5 million for the year with the loss largest in the first quarter and decreasing sequentially as the year unfolds. We also plan to our production from at least one additional mill in 2015.

Fourth, finally we recognize the long-term importance of generating positive adjusted EBITDA to make this business sustainable. We plan to grow RBT’s revenues further in 2018, while continuing to control costs and expenses which should position us to achieve positive adjusted EBITDA by mid-2019.

Long term, we are increasingly convinced that RBT has the potential to earn strong net margins, high returns on capital and with that increasing shareholder value.

We would like to close the formal portion of our comments by thanking of our employees for the major efforts they are making to transform RiceBran Technologies into a more successful company. We'd also like to thank our shareholders for their investment in us. Hector, we are now ready for our question-and-answer session..

Thank you. [Operator Instruction] Our first question comes from the line of Chris Krueger with Lake Street Capital Markets. Please proceed with your question..

Good afternoon, guys..

Hi Chris..

Hi.

You talked a lot about new business coming on, but I was wondering if you can give a little more detail on your pipeline of potential customers, like now versus six months ago or maybe even 12 months ago, either the size of the pipeline or the number of customers or the percentage of growth that is growing or what not?.

Sure. As a relatively new person to the company, I've been here for about a year. I would say the pipeline and I am going to have Michael chime in here in a second. But I would say the pipeline that I've seen Michael and his team developing has grown considerably.

Right now, I would say that there are dozens of what I would call high caliber opportunities for customers. There are many, many times out of people that it would be and what Michael would call his funnel and we have visibility for a lot of these starting to convert right now.

So, I would tell you from my perspective, I feel very good about where we're at and where it's going, but Michael would you give a little color?.

Yes, and our pipeline has increased substantially over the past year and a half. One of our goals that we've had to do is to really target and really filter out leads as they convert to opportunities and as they convert to funnel then they convert to revenue. And what we've been doing is just focusing on, where we know we can be successful right away.

And what we've been doing with that is, basically targeting key accounts and working with them before getting distracting on outside of stock. So basically, our pipeline has increased dramatically. We've also increased that with much more of a quality pipeline than we had in the past.

And we're also seeing some conversion of it falling into the funnel and throughout the funnel into revenue as well..

Okay. In your comments earlier, you talked about a couple customers in baking segment.

Any anything related to equine?.

We are not going to talk about specific customers Chris. But I think, it'd be fair to say that we feel positive about pretty much every category we're in. I would say, it's likely that will be facing new customer has an expansion with existing customers in all the customer categories Michael identified earlier..

Have you found a new partner yet in the rice growing region in Arkansas?.

Yeah, we're actively talking to a number of people. We have identified a mill that we're very intrigued by, but we're just - we're in exploratory stages right now..

The Rice mill that mentioned few minutes ago, or is there yet another mill?.

We have one mill that we're talking to right now..

And then last, are there any like regulations - like government regulations or certifications or anything like that, that you have to get through to get the next stage?.

What was the last part of your question that we need to get to the next stage of growth as....

When of these customers are getting a mill approved or whatever the case may be?.

I mean as you know there's new FSMA regulations from FDA in terms of food safety. We are definitely operating under those guidelines and updating our facilities to make sure we're fully compliant with FSMA regulations. We're looking to get certification, SQF certification.

And so, those are all guidelines for food ingredients and the animal sector as well, there are regulations and we are updating all of our facilities. And also, when we look to partner with other mills we’re looking at all of those regulations to make sure that they're in place.

So, a lot of that will happen this year to be able to meet our customer’s needs..

All right very good. That's all I got. Thanks..

Thanks Chris..

Our next question comes from the line of Edward Stoltenberg with the Geneva Group. Please proceed with your question..

Afternoon gentlemen, the reason I'm calling or the question -- before I ask the question, I want to congratulate you people of getting out of Brazil. That was one of the most, the great, great decision. That was just a dark hole or a black hole.

My question is it conceivable to see you people becoming EBITDA positive by the end of this year?.

I think, I'd prefer to answer that by saying, we would love to be EBITDA positive by the end of the year. Management is focused on ideally achieving that, but our plan right now is that we lately become EBITDA positive early in 2019..

Okay. All right. Thank you..

You're welcome..

Our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question. .

Sure. I just have a couple questions.

When you said, the SG&A should be maintained were you talking about in absolute dollars or as a percent of revenues?.

From a simplistic perspective, I think most of the SG&A will be flat in obsolete dollars. Where we're going to have some variance, Anthony is basically the success of Michael Goose's team as they deliver sales, people will be paid for results.

So, we will have some sales related compensation that will drive the model, but the rest of the business should be flat and out..

Okay that makes sense. And then in terms of the sales force, did you say that that you can add about one or two people.

What is that right now?.

Our current team is about four sales people, including myself. We’re looking to possibly expand 2 people strategically in key categories where we could use some expertise, they'll help penetrate. .

Okay. And then in terms of the fourth quarter revenues there was there was a facility– some downtime at a facility and then some delayed deliveries.

Can you elaborate a little bit more on that? Have those been rectified and cleared or is still dealing with that?.

Nothing major, we're talking you know a low six-digit number. So, hundreds of thousands sort of number. The sort of things that are just growing pains or the things just learning to have certain responses do certain things. We have a very good operations team. So, I think we're in good shape there.

We have some customer timing issues, when customers wanted delivery and we had a few things related to some improvements we are making and some of facilities for some of the growth is coming here literally were related for their growth as we speak. We have to get some things done.

And that caused us to close facilities periodically to put some of these things in. We're still going to have some of that, but we think we're managing our process better..

Okay. Great. That's helpful. Thanks guys..

Thanks Anthony..

[Operator Instruction] Our next question comes from the line of George Johnston, Private Investor. Please proceed with your question..

Thank you, guys for the call, this really sounds very promising. One of the best calls ever as far as our future looks.

Michael you mentioned the section at the Food Show was what disruptive innovation, was that it?.

Yes, we were in more of an up and coming brands spot or hot items..

Okay. As I notice [indiscernible] one of our Board members has a new book out. He mentioned the term disruptive innovation is major changes in food. And in one of the big ones out there now is Meatless Meat. There is a couple of companies trying going out at it.

I know the CEO of Continental Grain, Paul Fribourg spoke at a Milken Institute Food Forum, which is on YouTube last June. He had a very powerful statement he said, we used to be in the largest cattle feeding [Abrupt End].

Ladies and gentlemen, we have reached the end of the question-and-answer session and I would like to turn the call back to management for closing remarks..

We'd like to thank everybody for attending the call. We will be reporting our first quarter results sometime in early May. We'll publish that date shortly and we look forward to updating people on our progress this year. Thank you..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..