RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 8. EQUITY, SHARE-BASED COMPENSATION AND WARRANTS

In February 2016, our board of directors authorized the issuance of 3,000 shares of Series F Preferred Stock. The Series F Preferred Stock is non-voting and may be converted into a total of 2,000,000 shares of our common stock at the holder’s election at any time, subject to certain beneficial ownership limitations, at a ratio of 1 preferred share for 666.66666 shares of common stock. The Series F Preferred Stock is only entitled to receive dividends if we declare dividends, in which case the dividend will be paid (i) first an amount equal to $0.01 per share of preferred stock and (ii) then to and in the same form as dividends paid on shares of our common stock. Otherwise, the Series F Preferred Stock has no liquidation or other preferences over our common stock.

The number of common shares and warrants issuable if the Investors elect the Exchange Right is variable and indeterminate. For accounting purposes, we are not able to conclude that we have sufficient authorized and unissued shares to settle all contracts subject to the FASB’s derivative guidance. Our adopted sequencing approach is based on earliest issuance date (the Share Sequencing), therefore we are required to record certain warrants issued after the right was granted to the Investors in June 2015 at fair value, as derivative warrant liabilities. For the same reason, the 3,000 shares of Series F Preferred Stock, which are convertible to 2,000,000 shares of our common stock, have been recorded in temporary equity on our condensed consolidated balance sheet.

A summary of equity activity for the six months ended June 30, 2016, (in thousands, except share data) follows.

	Common Stock					Accumulated			Accumulated Deficit Attributable to Noncontrolling Interest in			Accumulated Other Comprehensive			Total (Deficit)
	Shares		Amount			Deficit			Nutra SA			Loss			Equity
Balance, December 31, 2015		9,537,415	$	262,895		$	(250,738	)	$	-		$	(4,889	)	$	7,268
Share-based compensation, employees and directors		-		456			-			-			-			456
Issuance of preferred stock and warrants		-		(447	)		-			-			-			(447	)
Dividend on preferred stock--beneficial conversion feature		-		551			(551	)		-			-			-
Issuance of common stock to supplier		950,000		-			-			-			-			-
Other		9,575		13			-			-			-			13
Accumulated deficit attributable to noncontrolling interest in Nutra SA		-		-			-			(1,599	)		-			(1,599	)
Foreign currency translation		-		-			-			-			581			581
Net loss		-		-			(6,308	)		-			-			(6,308	)
Balance, June 30, 2016		10,496,990	$	263,468		$	(257,597	)	$	(1,599	)	$	(4,308	)	$	(36	)

In February 2016, we issued 950,000 shares of common stock to a supplier. The shares are being held in escrow until earned (as defined in our agreement) at a fixed price of $2.80 per share. As of June 30, 2016, none of the shares have been released from escrow.

A summary of warrant activity for the six months ended June 30, 2016, (in thousands, except share and per share data) follows.

	Equity Warrants						Liability Warrants
	Shares Underlying		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Shares Underlying		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding, December 31, 2015		6,367,139	$	5.73		3.4		726,489	$	5.24		2.9
Issued		-	NA					2,685,000		2.03		4.5
Impact of anti-dilution clauses		-	NA					1,063,379		1.50		1.3
Exercised		-	NA					-	NA
Forfeited, expired or cancelled		-	NA					-	NA
Outstanding, June 30, 2016		6,367,139	$	5.73		3.0		4,474,868	$	1.84		3.8
Exercisable, June 30, 2016		6,367,139	$	5.73		3.0		1,814,868	$	1.61		1.9

In January 2016, we entered into a note payable with a director in the principal amount of $0.3 million and issued the director warrants to acquire 25,000 share of common stock (exercise price of $5.25, exercisable immediately and expiring in January 2021). On the date of issuance, we recorded the warrant at fair value as a derivative warrant liability, pursuant to the Share Sequencing, and recorded a corresponding debt discount which amortized to interest expense when we repaid the note and accumulated interest in full in March 2016.

Index

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

In February 2016, we issued and sold 3,000 shares of Series F Preferred Stock for $1,000 per share and sold warrants to purchase 2,660,000 shares of common stock (exercise price of $2.00 per share, exercisable beginning in August 2016 and expiring in August 2021). The underwriters of the offering received a cash fee of $0.2 million. The net proceeds from the offering was $2.6 million, after deducting underwriting discounts, commissions and other cash offering expenses of $0.4 million. On the date of issuance, we allocated $2.5 million of the $3.0 million gross proceeds to derivative warrant liability, to record the warrants at fair value and recorded the remaining $0.5 million proceeds as preferred stock. We recorded a dividend on preferred stock for the preferred stock beneficial conversion feature equal to the proceeds allocated to the preferred stock at issuance ($0.5 million), as the fair value of the common stock underlying the convertible preferred stock at issuance was $2.7 million. As a result of this offering, the exercise price of certain warrants that contain full ratchet anti-dilution provisions was reduced from $5.24 per share to $1.50 per share and the number of shares of common stock underlying these warrants increased from 426,489 shares to 1,489,868 shares.

In June 2016, we entered into an amendment agreement with our Lender to extend the prior modification of the loan agreement. In connection with this amendment, we repriced a previously issued warrant held by the Lender from $5.25 per share to $1.85 per share. Both prior to and subsequent to the modification, we recorded the warrant at fair value as a derivative warrant liability, pursuant to the Share Sequencing, with changes in fair value recorded in the condensed consolidated statements of operations.

NOTE 9. COMMITMENTS AND CONTINGENCIES

In addition to the matters discussed below, from time to time we are involved in litigation incidental to the conduct of our business. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. Legal costs are expensed as incurred and are included in professional fees. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows.

Irgovel Purchase

On August 28, 2008, former Irgovel stockholder David Resyng filed an indemnification suit against Irgovel, Osmar Brito and the remaining former Irgovel stockholders (Sellers), requesting: (i) the freezing of the escrow account maintained in connection with the transfer of Irgovel’s corporate control to us and the presentation of all documentation related to the transaction, and (ii) damages in the amount of the difference between (a) the sum received by David Resyng in connection with the judicial settlement agreement executed in the action for the partial dissolution of the limited liability company filed by David Resyng against Irgovel and the Sellers and (b) the amount received by the Sellers in connection with the sale of Irgovel’s corporate control to us, in addition to moral damages as determined in the court’s discretion. The amount of damage claimed by Mr. Resyng is approximately $3.0 million.

We believe that the filing of the above lawsuit is a fundamental default of the obligations undertaken by the Sellers under the quotas purchase agreement for the transfer of Irgovel’s corporate control, executed by and among the Sellers and us on January 31, 2008 (Purchase Agreement). Consequently, we believe that the responsibility for any indemnity, costs and expenses incurred or that may come to be incurred by Irgovel and/or us in connection with the above lawsuit is the sole responsibility of the Sellers.

On February 6, 2009, the Sellers filed a collection lawsuit against us seeking payment of the second installment of the purchase price under the Purchase Agreement, which the Sellers assert is approximately $1.0 million. We have withheld payment of the second installment pending resolution of the Resyng lawsuit noted above. RiceBran Technologies, the parent company, has not been served with any formal notices in regard to this matter. To date, only Irgovel has received formal legal notice. In addition, the Purchase Agreement requires that all disputes between us and the Sellers be adjudicated through arbitration. In 2015, a final unappealable arbitration award was granted in our favor. We are considering collection actions against the Sellers for amounts awarded in excess of the escrow funds described below and have a contingent gain in an amount that is not currently determinable.

As part of the Purchase Agreement, $2.0 million was deposited into an escrow account to cover contingencies with the net remaining funds payable to the Sellers upon resolution of all contingencies. As of December 31, 2015, the balance in the escrow account was $1.9 million and was included in restricted cash in our condensed consolidated balance sheet. On January 12, 2016, the US District Court for the District of Arizona entered a final judgment in our favor affirming the arbitration award received in Brazil. On March 24, 2016, the $1.9 million in the escrow account was released to us to fund the award owed to us by the Sellers and, as required under an agreement with the Lender, we repaid $1.0 million of the term loan with the Lender.

Index

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

With regard to the request for freezing the escrow funds noted above, the Brazilian court ordered Irgovel not to access those funds under the premise that the Sellers may have a right to those funds as originally contemplated in the Purchase Agreement. A fine of R$10,000/day for violating that order was established by the court. From the escrow release date of March 24, 2016 through today, no fine has been imposed. We believe that with the final judgment in our favor, the Sellers no longer have any possible legal claim on the escrow funds and, thus, the court will remove the freeze. We are working with counsel in Brazil to effectuate that outcome.

We believe that there are no significant remaining contingencies. We recognized a gain of $1.6 million in the first quarter of 2016, equal to the difference between the $1.9 million escrow liability and the $0.3 million of resolved pre-acquisition contingencies that had either been paid or specifically identified and accrued.

Irgovel - Events of Default

As further described in Note 6, Irgovel is required to meet minimum annual processing targets or to achieve EBITDA in local currency of at least R$4.0 million annually. If not achieved, this would result in an event of default. It is possible that an event of default may be triggered in the future and a waiver of non-compliance may not be obtained from the Investors.

NOTE 10. SEGMENT INFORMATION

The tables below present segment information for the periods identified and provide reconciliations of segment information to total consolidated information (in thousands).

Three Months Ended June 30, 2016	Corporate			USA			Brazil			Consolidated
Revenues	$	-		$	8,778		$	1,767		$	10,545
Cost of goods sold		-			6,132			2,429			8,561
Gross profit		-			2,646			(662	)		1,984
Depreciation and amortization (in selling, general and administrative)		(23	)		(270	)		(15	)		(308	)
Other operating expense		(2,387	)		(1,325	)		(3,650	)		(7,362	)
Income (loss) from operations	$	(2,410	)	$	1,051		$	(4,327	)	$	(5,686	)

Net income (loss) attributable to RiceBran Technologies shareholders	$	(4,527	)	$	1,051		$	(3,132	)	$	(6,608	)
Interest expense		454			-			287			741
Depreciation (in cost of goods sold)		-			224			232			456
Purchases of property		-			123			86			209

Six Months Ended June 30, 2016	Corporate			USA			Brazil			Consolidated
Revenues	$	-		$	16,532		$	4,064		$	20,596
Cost of goods sold		-			11,426			4,949			16,375
Gross profit		-			5,106			(885	)		4,221
Depreciation and amortization (in selling, general and administrative)		(46	)		(584	)		(26	)		(656	)
Other operating expense		(3,661	)		(2,700	)		(4,380	)		(10,741	)
Income (loss) from operations	$	(3,707	)	$	1,822		$	(5,291	)	$	(7,176	)

Net income (loss) attributable to RiceBran Technologies shareholders	$	(4,094	)	$	1,822		$	(4,036	)	$	(6,308	)
Interest expense		1,133			-			699			1,832
Depreciation (in cost of goods sold)		-			403			426			829
Purchases of property		-			188			229			417

Index

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

Three Months Ended June 30, 2015	Corporate			USA			Brazil			Consolidated
Revenues	$	-		$	6,889		$	4,516		$	11,405
Cost of goods sold		-			4,638			4,532			9,170
Gross profit		-			2,251			(16	)		2,235
Depreciation and amortization (in selling, general and administrative)		(19	)		(395	)		(15	)		(429	)
Other operating expense		(1,442	)		(747	)		(1,163	)		(3,352	)
Income (loss) from operations	$	(1,461	)	$	1,109		$	(1,194	)	$	(1,546	)

Net income (loss) attributable to RiceBran Technologies shareholders	$	(3,332	)	$	1,109		$	(1,303	)	$	(3,526	)
Interest expense		357			-			518			875
Depreciation (in cost of goods sold)		-			296			457			753
Purchases of property		-			115			153			268

Six Months Ended June 30, 2015	Corporate			USA			Brazil			Consolidated
Revenues	$	-		$	11,952		$	9,113		$	21,065
Cost of goods sold		-			8,051			9,724			17,775
Gross profit		-			3,901			(611	)		3,290
Depreciation and amortization (in selling, general and administrative)		(34	)		(788	)		(112	)		(934	)
Other operating expense		(2,620	)		(2,199	)		(2,021	)		(6,840	)
Income (loss) from operations	$	(2,654	)	$	914		$	(2,744	)	$	(4,484	)

Net income (loss) attributable to RiceBran Technologies shareholders	$	(4,483	)	$	914		$	(2,958	)	$	(6,527	)
Interest expense		650			-			1,023			1,673
Depreciation (in cost of goods sold)		-			437			973			1,410
Purchases of property		-			351			224			575

The tables below present segment information for selected balance sheet accounts (in thousands).

	Corporate		USA		Brazil		Consolidated
As of June 30, 2016
Inventories	$	-	$	3,656	$	324	$	3,980
Property, net		438		8,017		11,491		19,946
Goodwill		-		790		-		790
Intangible assets, net		-		711		-		711
Total assets		2,207		16,023		13,885		32,115

As of December 31, 2015
Inventories		-		3,302		555		3,857
Property, net		418		8,408		9,502		18,328
Goodwill		-		790		2,468		3,258
Intangible assets, net		-		1,225		-		1,225
Total assets		3,497		15,260		14,878		33,635

Corporate segment total assets include cash, restricted cash, property and other assets.

We review our long-lived assets, including goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the second quarter of 2016, a number of economic and market conditions have arisen related to operations of our Brazil segment that impact raw bran availability and working capital necessary to acquire it, resulting in the Brazil segment taking an estimated goodwill impairment charge of $3.0 million (see Note 5). Additional information on impairment testing of long-lived assets, intangible assets and goodwill can be found in Note 9 of our Annual Report on Form 10-K for the year ended December 31, 2015.

Index

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

The following table presents revenue by geographic area for the three and six months ended June 30, 2016 and 2015 (in thousands).

	Three Months Ended				Six Months Ended
	2016		2015		2016		2015
United States	$	8,344	$	6,861	$	15,373	$	11,823
Brazil		888		2,819		2,975		5,902
Other international		1,313		1,725		2,248		3,340
Total revenues	$	10,545	$	11,405	$	20,596	$	21,065

NOTE 11. FAIR VALUE MEASUREMENTS

The fair value of cash and cash equivalents, accounts and other receivables and accounts payable approximates their carrying value due to their shorter maturities. As of June 30, 2016, the fair value of our Corporate segment debt (Level 3 measurement) approximates the $9.6 million carrying value of that debt, based on current market rates for similar debt with similar maturities. The fair value of our Brazil segment debt (Level 3 measurement) also approximates the $6.8 million carrying value of that debt based on the current market rates for similar debt with similar maturities.

Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Certain assets and liabilities are presented in the financial statements at fair value. Assets and liabilities measured at fair value on a recurring basis include derivative warrant and conversion liabilities. Assets and liabilities measured at fair value on a non-recurring basis may include property.

We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:

●

Level 1 – inputs include quoted prices for identical instruments and are the most observable.

●

Level 2 – inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and yield curves.

●

Level 3 – inputs are not observable in the market and include management’s judgments about the assumptions market participants would use in pricing the asset or liability.

For instruments measured using Level 3 inputs, a reconciliation of the beginning and ending balances is disclosed.

The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our condensed consolidated balance sheets (in thousands):

	Level 1		Level 2		Level 3		Total
Total liabilities at fair value, as of June 30, 2016 - derivative warrant liabilities	$	-	$	-	$	4,004	$	4,004
Total liabilities at fair value, as of December 31, 2015 - derivative warrant liabilities	$	-	$	-	$	678	$	678

Warrants accounted for as derivative liabilities are valued using the lattice model each reporting period and the resultant change in fair value is recorded in the condensed consolidated statements of operations. The lattice model requires us to assess the probability of future issuance of equity instruments at a price lower than the current exercise price of the warrants. The risk-free interest rate is determined by reference to the treasury yield curve rate of instruments with the same term as the warrant. Additional assumptions that were used to calculate fair value follow.

	June 30, 2016	December 31, 2015
Risk-free interest rate	0.6% - 1.3%	0.9% -1.2%
	(1.1% weighted average)	(1.1% weighted average)
Expected volatility	59% - 87%	71% - 89%
	(82% weighted average)	(78% weighted average)

Index

RiceBran Technologies

Notes to Unaudited Condensed Consolidated Financial Statements

The following tables summarize the changes in level 3 items measured at fair value on a recurring basis (in thousands):

Total Level 3 Fair Value	Fair Value as of Beginning of Period			Total Realized and Unrealized Gains (Losses)			Issuance of New Instruments			Fair Value, at End of Period
					(1	)
Six Months Ended June 30, 2016, derivative warrant liabilities	$	(678	)	$	(852	)	$	(2,474	)	$	(4,004	)
Six Months Ended June 30, 2015, derivative warrant liabilities	$	(955	)	$	557		$	(724	)	$	(1,122	)

(1)

Included in change in fair value of derivative warrant liabilities in our unaudited condensed consolidated statements of operations.

NOTE 12. RELATED PARTY TRANSACTIONS

Transactions with Baruch Halpern

Prior to 2015, entities beneficially owned by Baruch Halpern, a director, invested $2.6 million in our subordinated convertible notes and related warrants, the terms of which were subsequently modified. In the three and six months ended June 30, 2016 and 2015, we expensed and paid $0.1 million and $0.2 million, respectively, of interest on the subordinated convertible notes beneficially owned by Mr. Halpern.

In January 2016, we entered into a note payable with Mr. Halpern in the principal amount of $0.3 million and issued Mr. Halpern warrants to acquire 25,000 shares of common stock (exercise price of $5.25, exercisable immediately and expiring in January 2021). Principal and all interest, accumulating at an 11.75% annual rate, was payable on October 31, 2016. We repaid the note and accumulated interest in full in March 2016.

Transactions with W. John Short

Prior to 2015, W. John Short, our chief executive officer and director, invested $50,000 in our subordinated convertible notes and related warrants, the terms of which were subsequently modified. In the three and six months ended June 30, 2016 and 2015, we expensed and paid approximately $2,000 and $3,000, respectively, of interest on the subordinated convertible notes beneficially owned by Mr. Short.

NOTE 13. SUBSEQUENT EVENT

2016 Annual Meeting of Shareholders (2016 Shareholder Meeting)

On July 5, 2016, we entered into a Settlement Agreement (Settlement Agreement) with (i) LF-RB Management, LLC, Stephen D. Baksa, Richard Bellofatto, Edward M. Giles, Michael Goose, Gary L. Herman, Larry Hopfenspirger and Richard Jacinto II (collectively, the LF-RB Group) and (ii) Beth Bronner, Ari Gendason and Brent Rosenthal (the LF-RB Designees and together with the LF-RB Group, the Shareholder Group). The LF-RB Group beneficially owns approximately 9.0% of our outstanding stock.

Among other things, the Settlement Agreement provides that:

●

Our Board of Directors (the Board) cumulated our votes from the 2016 Shareholder Meeting in favor of the election of John Short, Baruch Halpern, Henk Hoogenkamp and David Goldman;

●

The LF-RB Group cumulated its votes from the 2016 Shareholder Meeting in favor of Brent Rosenthal, Beth Bronner and Michael Goose;

●

Michael Goose resigned from the Board effective immediately following his election to the Board, and the Board appointed Ari Gendason to the Board to fill this vacancy;

●

Brent Rosenthal was appointed as Chairperson of the Board;

●

We paid the LF-RB Group $50,000 in cash and issued 100,000 shares of our common stock to designees of the LF-RB Group to partially reimburse the LF-RB Group for out-of-pocket legal fees and other expenses incurred by the LF-RB Group in connection with its solicitation of proxies to elect its designees to the Board at the 2016 Shareholder Meeting; and

●

The Settlement Agreement may be terminated by either side at any time following the close of business of December 31, 2018.

In the second quarter ended June 30, 2016, we incurred approximately $1.1 million in additional expenses related to the proxy contest at the 2016 Shareholder Meeting. These expenses are recorded in selling, general and administrative in the condensed consolidated statements of operations.

Index

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

See Note 2 of our Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of going concern considerations and management’s plans.

See Note 3 of our Notes to Unaudited Condensed Consolidated Financial Statements for a description of our business and the operating segments of our business.

See Notes 5 and 10 of our Notes to Unaudited Condensed Consolidated Financial Statements for a description of our long-lived asset impairment review.

Results of Operations

THREE MONTHS ENDED JUNE 30, 2016 and 2015

Revenue and Gross Profit

Revenues (in thousands):

	Three Months Ended June 30,
	2016		% of Total Revenues		2015		% of Total Revenues		Change			% Change
USA segment	$	8,778		83.2	$	6,889		60.4	$	1,889			27.4
Brazil segment		1,767		16.8		4,516		39.6		(2,749	)		(60.9	)
Total revenues	$	10,545		100.0	$	11,405		100.0	$	(860	)		(7.5	)

Consolidated revenues for the second quarter of 2016 were $10.5 million compared to $11.4 million in the prior year quarter, a decrease of $0.9 million, or 7.5%.

USA segment revenues increased $1.9 million, or 27%, quarter over quarter. Human nutrition product revenues increased 30%, quarter over quarter. Human nutrition revenue gains were primarily attributable to increased buying from the existing customer base and specifically the contract manufacturing accounts which grew by 35%. Animal feed product revenues increased 16% over prior year levels driven by the supply and cooperation agreement entered into with Kentucky Equine Research (KER) at the end of December 2015.

Brazil segment revenues decreased $2.7 million, or 61%, in the second quarter of 2016, compared to the prior year quarter. The average exchange rate decreased 12% quarter over quarter. On a local currency basis, Brazil segment revenue declined 55% quarter over quarter, and raw bran volume processed declined 60% in the current period. The decline in revenue in the second quarter of 2016 was due to the continuing challenge of sourcing raw bran caused by a confluence of three issues: (1) adverse weather conditions reducing the volume of rice during harvest, (2) an increase in competition for purchasing raw bran and (3) having sufficient working capital to meet raw bran supplier payment demands. The decrease in access to raw bran caused a decline in production volume, resulting in a decrease in revenues. The Brazil segment continues to sell everything it makes and demand remains strong from customers.

Gross profit (in thousands):

	Three Months Ended June 30,
	2016			Gross Profit %			2015			Gross Profit %			Change			Change in Gross Profit %
USA segment	$	2,646			30.1		$	2,251			32.7		$	395			(2.6	)
Brazil segment		(662	)		(37.5	)		(16	)		(0.4	)		(646	)		(37.1	)
Total gross profit	$	1,984			18.8		$	2,235			19.6		$	(251	)		(0.8	)

Consolidated gross profit in the second quarter of 2016 decreased slightly by $0.3 million with gross profit percentage remaining relative flat at 18.8%, a decline of less than one percentage point.

Index

The USA segment gross profit percentage decreased 2.6 percentage points to 30.1 in the second quarter of 2016 as compared to the prior year quarter. The decrease was primarily attributable to lower production volumes at our owned plant facilities that produce ingredients. Revenue increases for ingredient and animal nutrition products were met with existing inventories. Additionally, the raw bran supplier for our Mermentau facility that produces animal feed products was not producing for eight weeks during the quarter. As noted above, animal nutrition revenues were up significantly in the current quarter. This demand was met by shipping our animal feed customers from California which resulted in higher costs. Further, as part of the KER agreement, we are sharing one-fourth of our gross profit on equine nutrition customers with KER. Over time, the additional volume generated by the agreement will continue to drive down per unit production costs as compared to the prior year quarters and will offset the expense of sharing. Raw bran prices have remained relatively flat when comparing quarter over quarter.

The Brazil segment continues to experience negative gross profit in the second quarter of 2016, primarily due to the three reasons stated above: (1) adverse weather conditions reducing the volume of rice during harvest, (2) an increase in competition for purchasing raw bran and (3) having sufficient working capital to meet raw bran supplier payment demands. Beginning in the first quarter of 2016, obtaining adequate amounts of raw bran in order to operate the Irgovel plant at an appropriate level was and continues to be a challenge. This has contributed to a 60% decline in raw bran processing volume quarter over quarter. The plant is only operating at approximately 27% of its targeted capacity of 300 metric tons per day resulting in very inefficient operations and significant negative gross profit. For cost reasons, bagged animal feed production was eliminated in the middle of the first quarter in 2016 and all efforts were shifted to selling bulk animal feed which is a simpler operation that requires less personnel. Additionally, because of the significantly reduced supply of raw bran available from rice millers, the cost of raw bran when it is available has increased by 55% to historically high prices.

Operating Expenses (in thousands):

	Three Months Ended June 30, 2016
	Corporate		USA		Brazil		Consolidated
Selling, general and administrative	$	2,387	$	1,325	$	626	$	4,338
Depreciation and amortization		23		270		15		308
Goodwill impairment		-		-		3,024		3,024
Total operating expenses	$	2,410	$	1,595	$	3,665	$	7,670

	Three Months Ended June 30, 2015
	Corporate		USA		Brazil		Consolidated
Selling, general and administrative	$	1,442	$	747	$	1,163	$	3,352
Depreciation and amortization		19		395		15		429
Total operating expenses	$	1,461	$	1,142	$	1,178	$	3,781

	Favorable (Unfavorable) Change
	Corporate			USA			Brazil			Consolidated
Selling, general and administrative	$	(945	)	$	(578	)	$	537		$	(986	)
Depreciation and amortization		(4	)		125			-			121
Goodwill impairment		-			-			(3,024	)		(3,024	)
Total operating expenses	$	(949	)	$	(453	)	$	(2,487	)	$	(3,889	)

Consolidated operating expenses were $7.7 million for the second quarter of 2016, compared to $3.8 million for the second quarter of 2015, an increase of $3.9 million. Excluding the goodwill impairment charge of $3.0 million, consolidated operating expenses increased $0.9 million, or 22.9%.

Corporate segment selling, general and administrative expenses (SG&A) in the second quarter of 2016 increased $0.9 million over the prior year quarter. The Corporate segment incurred approximately $1.1 million of additional expenses during the second quarter of 2016 as a result of the proxy contest in connection with the 2016 Annual Shareholder Meeting (see Note 13). The expenses incurred included legal fees, investor relations and proxy solicitation consulting fees, incremental electronic filing fees, shareholder mailing costs and the settlement payment made to the dissident group as further described in Note 12.

USA segment SG&A expenses increased $0.6 million in the current quarter as compared to prior year. The increase is primarily related to increases in: employee-related expenses, including travel expenses, commissions as a result of the KER agreement and marketing expenses.

Index

Brazil segment SG&A expenses decreased $0.5 million in the current quarter due to the decline in the exchange rate between the Brazilian Real and the US Dollar. The average exchange rate decreased 12% quarter over quarter. In addition, further cost reduction efforts were implemented to reduce administrative personnel overhead during the quarter along with reduced commissions and other selling costs associated with the decline in revenues.

The Brazil segment also recorded an estimated goodwill impairment charge of $3.0 million in the three months ended June 30, 2016 (see Note 5).

Consolidated depreciation and amortization decreased $0.1 million quarter over quarter, primarily due to the impact of certain USA segment fixed assets becoming fully depreciated subsequent to the second quarter of 2015.

Other Income (Expense) (in thousands):

	Three Months Ended June 30, 2016
	Corporate			USA		Brazil			Consolidated
Interest income	$	-		$	-	$	(23	)	$	(23	)
Interest expense		(454	)		-		(287	)		(741	)
Change in fair value of derivative warrant liabilities		(1,663	)		-		-			(1,663	)
Foreign currency exchange, net		-			-		72			72
Loss on extinguishment of debt		-			-		-			-
Other		-			-		(75	)		(75	)
Other expense	$	(2,117	)	$	-	$	(313	)	$	(2,430	)

	Three Months Ended June 30, 2015
	Corporate			USA		Brazil			Consolidated
Interest income	$	-		$	-	$	19		$	19
Interest expense		(357	)		-		(518	)		(875	)
Change in fair value of derivative warrant liabilities		384			-		-			384
Foreign currency exchange, net		-			-		32			32
Loss on extinguishment of debt		(1,904	)		-		-			(1,904	)
Other		-			-		(74	)		(74	)
Other expense	$	(1,877	)	$	-	$	(541	)	$	(2,418	)

	Favorable (Unfavorable) Change
	Corporate			USA		Brazil			Consolidated
Interest income	$	-		$	-	$	(42	)	$	(42	)
Interest expense		(97	)		-		231			134
Change in fair value of derivative warrant liabilities		(2,047	)		-		-			(2,047	)
Foreign currency exchange, net		-			-		40			40
Loss on extinguishment of debt		1,904			-		-			1,904
Other		-			-		(1	)		(1	)
Other income (expense)	$	(240	)	$	-	$	228		$	(12	)

Consolidated other income (expense) was $2.4 million of other expense for the second quarter of 2016 and 2015. The $2.0 million increase in expense related to the change in the fair value of derivative warrant liabilities was offset by the $1.9 million decline in expense associated with the loss on extinguishment of debt recorded in the prior year quarter.

Interest expense in the Brazil segment decreased $0.2 million due to a reduction in working capital lines of credit during the period. These lines of credit are secured by accounts receivable, which decreased as a result of the reduction in shipments during the quarter.

Index

SIX MONTHS ENDED JUNE 30, 2016 and 2015

Revenue and Gross Profit

Revenues (in thousands):

	Six Months Ended June 30,
	2016		% of Total Revenues		2015		% of Total Revenues		Change			% Change
USA segment	$	16,532		80.3	$	11,952		56.7	$	4,580			38.3
Brazil segment		4,064		19.7		9,113		43.3		(5,049	)		(55.4	)
Total revenues	$	20,596		100.0	$	21,065		100.0	$	(469	)		(2.2	)

Consolidated revenues for six months ended June 30, 2016 were $20.6 million compared to $21.1 million in the prior year period, a decrease of $0.5 million, or 2.2%.

USA segment revenues increased $4.6 million, or 38%, in the six months ended June 30, 2016 compared to the six months ended June 30, 2015. Human nutrition product revenues increased 39%, period over period. Human nutrition revenue gains were primarily attributable to increased buying from the existing customer base and specifically the contract manufacturing accounts which grew by 39%. Animal feed product revenues increased 36%. Animal nutrition revenue growth was driven by the supply and cooperation agreement entered into with Kentucky Equine Research (KER) at the end of December 2015.

Brazil segment revenues decreased $5.0 million, or 55%, in the six months ended June 30, 2016 compared to the six months ended June 30, 2015. The average exchange rate decreased 20% period over period. On a local currency basis, Brazil segment revenue declined 44% as compared to the prior year period. The decline in revenue in the first half of 2016 was due to the three issues noted above: (1) adverse weather conditions reducing the volume of rice during harvest, (2) an increase in competition for purchasing raw bran and (3) having sufficient working capital to meet raw bran supplier payment demands. The decrease in access to raw bran caused a decline in production volume, resulting in a decrease in revenues. The Brazil segment continues to sell everything it makes and demand remains strong from customers.

Gross profit (in thousands):

	Six Months Ended June 30,
	2016			Gross Profit %			2015			Gross Profit %			Change			Change in Gross Profit %
USA segment	$	5,106			30.9		$	3,901			32.6		$	1,205			(1.7	)
Brazil segment		(885	)		(21.8	)		(611	)		(6.7	)		(274	)		(15.1	)
Total gross profit	$	4,221			20.5		$	3,290			15.6		$	931			4.9

Consolidated gross profit for the six months ended June 30, 2016 improved $0.9 million, or 4.9 percentage points, to $4.2 million, compared to $3.3 million in the prior year period.

The USA segment gross profit percentage decreased 1.7 percentage points to 30.9 in the first six months of 2016, from 32.6 in the first six months of 2015. The decrease was attributable to lower production volumes at our owned plant facilities. Revenue increases for ingredient and animal nutrition products were met with existing inventories. Additionally, the raw bran supplier for our Mermentau facility that produces animal feed products was not producing for eight weeks during the second quarter of 2016. As noted above, animal nutrition revenues were up significantly during the first six months of 2016 as compared to prior year. This demand was met by shipping our animal feed customers from California which resulted in higher costs. Further, as part of the KER agreement, we are sharing one-fourth of our gross profit on equine nutrition customers with KER. Over time, the additional volume generated by the agreement will continue to drive down per unit production costs as compared to the prior year periods and will offset the expense of sharing.

Index

The Brazil segment experienced negative gross profit in first six months of 2016, primarily due to the three reasons stated above: (1) adverse weather conditions reducing the volume of rice during harvest, (2) an increase in competition for purchasing raw bran and (3) having sufficient working capital to meet raw bran supplier payment demands. Beginning in the first quarter of 2016, obtaining adequate amounts of raw bran in order to operate the Irgovel plant at an appropriate level was and continues to be a challenge. This caused a 53% decline in raw bran processing volume period over period. The plant operated at approximately 27% of its targeted capacity of 300 metric tons per day during the second quarter resulting in very inefficient operations and significant negative gross profit. For cost reasons, bagged animal feed production was eliminated in the middle of the first quarter in 2016 and all efforts were shifted to selling bulk animal feed which is a simpler operation that requires less personnel. Additionally, because of the significantly reduced supply of raw bran available from rice millers, the cost of raw bran when it is available has increased by 67% to historically high prices.

Operating Expenses (in thousands):

	Six Months Ended June 30, 2016
	Corporate		USA		Brazil		Consolidated
Selling, general and administrative	$	3,661	$	2,700	$	1,356	$	7,717
Depreciation and amortization		46		584		26		656
Goodwill impairment		-		-		3,024		3,024
Total operating expenses	$	3,707	$	3,284	$	4,406	$	11,397

	Six Months Ended June 30, 2015
	Corporate			USA			Brazil			Consolidated
Selling, general and administrative		$	2,620		$	2,199		$	2,021		$	6,840
Depreciation and amortization			34			788			112			934
Total operating expenses		$	2,654		$	2,987		$	2,133		$	7,774

	Favorable (Unfavorable) Change
	Corporate			USA			Brazil			Consolidated
Selling, general and administrative	$	(1,041	)	$	(501	)	$	665		$	(877	)
Depreciation and amortization		(12	)		204			86			278
Goodwill impairment		-			-			(3,024	)		(3,024	)
Total operating expenses	$	(1,053	)	$	(297	)	$	(2,273	)	$	(3,623	)

Consolidated operating expenses were $11.4 million for the first six months of 2016, compared to $7.8 million for the first six months of 2015, an increase of $3.6 million. Excluding the goodwill impairment charge of $3.0 million, consolidated operating expenses increased $0.6 million, or 7.7%.

Corporate segment SG&A expenses increased $1.0 million, or 40%, in the first half of 2016. This was primarily related to the $1.1 million of additional expenses during the second quarter of 2016 incurred as a result of the proxy contest in connection to the 2016 Annual Shareholder Meeting (see discussion for three month period above and Note 12).

USA segment SG&A increased $0.5 million due primarily to an increase in employee-related expenses, including travel expenses, and an increase in commissions as a result of the KER agreement.

Brazil segment SG&A expenses decreased $0.7 million in the first half of 2016 due to continuing declines in the exchange rate between the Brazilian Real and the US Dollar. The average exchange rate decreased 20% from the prior year period. The impact of the exchange rate on expenses offset the one-time severance expenses of $0.2 million related to the reduction in staff associated with the bagged animal feed production eliminated in the middle of the first quarter 2016. Additionally, further reductions in administrative personnel and lower production in the second quarter of 2016 have resulted in additional cost reductions.

The Brazil segment also recorded an estimated goodwill impairment charge of $3.0 million in the six months ended June 30, 2016 (see Note 5).

Consolidated depreciation and amortization decreased $0.3 million quarter over quarter, primarily due to the impact of certain USA segment and Brazil segment fixed assets becoming fully depreciated subsequent to the first quarter of 2015.

Index

Other Income (Expense) (in thousands):

	Six Months Ended June 30, 2016
	Corporate			USA		Brazil			Consolidated
Interest income	$	-		$	-	$	10		$	10
Interest expense		(1,133	)		-		(699	)		(1,832	)
Change in fair value of derivative warrant liabilities		(852	)		-		-			(852	)
Gain on resolution of Irgovel purchase litigation		1,598			-		-			1,598
Foreign currency exchange, net		-			-		138			138
Loss on extinguishment of debt		-			-		-			-
Other		-			-		(140	)		(140	)
Other expense	$	(387	)	$	-	$	(691	)	$	(1,078	)

	Six Months Ended June 30, 2015
	Corporate			USA		Brazil			Consolidated
Interest income	$	-		$	-	$	68		$	68
Interest expense		(650	)		-		(1,023	)		(1,673	)
Change in fair value of derivative warrant liabilities		557			-		-			557
Gain on resolution of Irgovel purchase litigation		-			-		-			-
Foreign currency exchange, net		-			-		(188	)		(188	)
Loss on extinguishment of debt		(1,904	)		-		-			(1,904	)
Other		155			-		(147	)		8
Other expense	$	(1,842	)	$	-	$	(1,290	)	$	(3,132	)

	Favorable (Unfavorable) Change
	Corporate			USA		Brazil			Consolidated
Interest income	$	-		$	-	$	(58	)	$	(58	)
Interest expense		(483	)		-		324			(159	)
Change in fair value of derivative warrant liabilities		(1,409	)		-		-			(1,409	)
Gain on resolution of Irgovel purchase litigation		1,598			-		-			1,598
Foreign currency exchange, net		-			-		326			326
Loss on extinguishment of debt		1,904			-		-			1,904
Other		(155	)		-		7			(148	)
Other income	$	1,455		$	-	$	599		$	2,054

Consolidated other income (expense) was $1.1 million of other expense for the first half of 2016, compared to other expense of $3.1 million for the first half of 2015.

The Corporate segment experienced a decrease in expense of $1.5 million from the prior year period. The $0.5 million increase in interest expense and the $1.4 million increase in expense related to the change in fair value of derivative warrant liabilities was offset by the $1.9 million decline in expense associated with the loss on extinguishment of debt in the prior year period. Additionally, in the first quarter of 2016, we recorded a $1.6 million gain related to the reversal of the Irgovel purchase litigation contingency. See Note 9 of our Notes to Unaudited Condensed Consolidated Financial Statements for information related to the Irgovel purchase litigation contingency in the first quarter of 2016. The gain related to the reversal of the Irgovel purchase litigation is nonrecurring in nature.

The Brazil segment other expense, net, decreased $0.6 million, primarily due to the $0.3 million change in foreign currency exchange, net, related to the impact of exchange rate changes on the Brazil segment’s US Dollar denominated debt as well as the $0.3 million decrease in interest expense due to a reduction in working capital lines of credit during the period. These lines of credit are secured by accounts receivable, which decreased as a result of the reduction in shipments during the 2016 period.

Liquidity, Going Concern and Capital Resources

With respect to liquidity and capital resources, we manage the Brazil segment, consisting currently of our plant in Brazil, separately from our U.S. based Corporate and USA segments. Cash on hand at our Brazil segment is generally unavailable for distribution to our Corporate and USA segments pursuant to the terms of the limited liability company agreement for Nutra SA. Cash used in operating activities for the six months ended June 30, 2016 and 2015, is presented below by segment (in thousands).

Index

	Six Months Ended June 30, 2016
	Corporate and USA			Brazil			Consolidated
Net income (loss)	$	(2,272	)	$	(5,982	)	$	(8,254	)
Adjustments to reconcile net income to net cash used in operations:
Depreciation and amortization		1,033			452			1,485
Change in fair value of derivative warrant and conversion liabilities		852			-			852
Goodwill impairment		-			3,024			3,024
Gain on resolution of Irgovel purchase litigation		(1,598	)		-			(1,598	)
Loss on extinguishment of debt		-			-			-
Other adjustments, net		854			110			964
Changes in operating assets and liabilities		(830	)		2,669			1,839
Net cash (used in) provided by operating activities	$	(1,961	)	$	273		$	(1,688	)

	Six Months Ended June 30, 2015
	Corporate and USA			Brazil			Consolidated
Net loss	$	(3,569	)	$	(4,034	)	$	(7,603	)
Adjustments to reconcile net income to net cash used in operations:
Depreciation and amortization		1,259			1,085			2,344
Change in fair value of derivative warrant and conversion liabilities		(557	)		-			(557	)
Gain on resolution of Irgovel purchase litigation		-			-			-
Loss on extinguishment of debt		1,904			-			1,904
Other adjustments, net		737			126			863
Changes in operating assets and liabilities		(755	)		1,442			687
Net cash used in operating activities	$	(981	)	$	(1,381	)	$	(2,362	)

On a combined basis, the Corporate and USA segments used $2.0 million of cash in operating activities in the first six months of 2016 compared to using $1.0 million of cash in the first six months of 2015. Additional working capital was deployed in the first half of 2016 for higher receivables and inventory balances necessary to support increasing revenues.

Total liquidity (cash on hand and revolver availability) in the Corporate and USA segments increased approximately $0.6 million during the first six months of 2016 primarily due to the February 2016 sale of preferred stock and the March 2016 release of restricted cash (see Note 2 of our Notes to Unaudited Condensed Consolidated Financial Statements for additional information). As of June 30, 2016, total liquidity is approximately $2.4 million.

The Brazil segment had $0.3 million in cash provided by operating activities in the first six months of 2016, compared to using $1.4 million of cash in the first six months of 2015. The increase was primarily the result of an increase in accounts payable (principally raw bran suppliers) and accrued payroll related tax obligations as we delayed non-essential payments during the second quarter. Additionally, accounts receivable decreased as we were able to collect on outstanding balances which were not offset by new sales. The nonpayment of working capital liabilities has resulted in suppliers refusing to ship raw bran and other materials necessary to maintain steady operation of the plant.

In addition to the working capital issues, the funds necessary to meet scheduled debt payments no longer exist without additional equity funding. As a result, the Brazil segment ceased making all bank debt payments in the second quarter. Discussions have ensued with the related banks with regard to renegotiation of existing debt agreements. However, there is no assurance these discussions will be successful.

Additional equity contributions from the USA segment totaling $1.1 million and $3.3 million were made during the first half of 2016 and 2015, respectively. We are currently working with our minority partner to reach agreement on additional funding for Irgovel. While these discussions have been ongoing for several months, we have not reached an agreement and there are no assurances we will reach an agreement. As of June 30, 2016, we may make additional investments in Nutra SA up to $0.4 million without prior approval of our senior lender.

The Brazil segment also recorded an estimated goodwill impairment charge of $3.0 million in the six months ended June 30, 2016 (see Note 5).

Index

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risk, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing and liquidity support or market risk or credit support risk to us.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and disclosures on the date of the financial statements. On an ongoing basis, we evaluate the estimates, including, but not limited to, those related to revenue recognition. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates.

For further information about other critical accounting policies, see the discussion of critical accounting policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Recent Accounting Pronouncements

See Note 1 in the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures.

We evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2015 based on the guidelines established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

During the most recently completed fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Index

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

See Note 9 in the Notes to Unaudited Condensed Consolidated Financial Statements for information regarding certain legal proceedings to which we are a party.

We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

Item 1A.

Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

The other investors in Nutra SA may convert their membership interest in Nutra SA into shares of our common stock which creates equity overhang.

Pursuant to the Nutra SA Investor Rights Agreement, as amended, the other investors in Nutra SA may convert their membership interests in Nutra SA into shares of our common stock at any time prior to January 1, 2018. The other investors of Nutra SA are entitled to an equity interest in our common stock such that the value of that common stock equals the appraised value of their interest in Nutra SA immediately prior to the conversion. Therefore the impact of a conversion is difficult to predict. The possibility that substantial amounts of our common stock may be issued to the other investors in Nutra SA or the perception that such conversion could occur could adversely affect the market price of our common stock and could impair our ability to raise additional capital through the sale of equity securities in the future.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended June 30, 2016, we issued the securities described below without registration under the Securities Act. Unless otherwise indicated below, the securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended. All issuances below were made without any public solicitation, to a limited number of persons and were acquired for investment purposes only.

We issued shares of common stock under agreements with vendors as summarized in the table which follows.

Date of Issuance		Shares of Common Stock			Vesting Period
June 30, 2016			6,354		Immediate

Item 3.

Defaults upon Senior Securities

None

Item 4.

Mine Safety Disclosures

None

Item 5.

Other Information

None

Index

Item 6.

Exhibits

The following exhibits are attached hereto and filed herewith:

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit Number	Filing/Effective Date	Filed Herewith
3.07	Certificate of Determination, Preferences and Rights of the Series F Convertible Preferred Stock, as filed with the Secretary of State of California on February 18, 2016	8-K	0-32565	3.1	February 23, 2016
4.09	Form of Warrant	8-K	0-32565	4.1	February 17, 2016
10.01	Amendment Agreement with Full Circle Capital Corporation, dated June 22, 2016					X
10.02	Settlement Agreement dated July 5, 2016	8-K	0-32565	10.1	July 11, 2016
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS (1)	XBRL Instance Document					X
101.SCH (1)	XBRL Taxonomy Extension Schema Document					X
101.CAL (1)	XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF (1)	XBRL Taxonomy Extension Calculation Definition Document					X
101.LAB (1)	XBRL Taxonomy Extension Calculation Label Document					X
101.PRE (1)	XBRL Taxonomy Extension Calculation Presentation Document					X

(1)

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: August 11, 2016

	/s/ W. John Short
	W. John Short
	Chief Executive Officer

	/s/ J. Dale Belt
	Jerry Dale Belt
	Chief Financial Officer

California (State or other jurisdiction of incorporation or organization)		87-0673375 (I.R.S. Employer Identification No.)
6720 North Scottsdale Road, Suite 390 Scottsdale, AZ (Address of Principal Executive Offices)		85253 (Zip Code)

Issuer’s telephone number, including area code: (602) 522-3000

	Three Months Ended						Six Months Ended
	2016			2015			2016			2015

Net loss	$	(8,116	)	$	(3,958	)	$	(8,254	)	$	(7,603	)

Other comprehensive income (loss) - foreign currency translation, net of tax		413			188			859			(1,229	)

Comprehensive loss, net of tax		(7,703	)		(3,770	)		(7,395	)		(8,832	)

Comprehensive loss attributable to noncontrolling interest, net of tax		1,375			370			1,668			1,495

Total comprehensive loss attributable to RiceBran Technologies shareholders	$	(6,328	)	$	(3,400	)	$	(5,727	)	$	(7,337	)

	June 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	1,977		$	1,070
Restricted cash		-			1,921
Accounts receivable, net of allowance for doubtful accounts of $587 and $512, respectively (variable interest entity restricted $378 and $1,003, respectively)		2,763			2,169
Inventories		3,980			3,857
Operating taxes recoverable		1,019			809
Deposits and other current assets		807			895
Total current assets		10,546			10,721
Property, net (variable interest entity restricted $2,427 and $2,102, respectively)		19,946			18,328
Goodwill		790			3,258
Intangible assets, net		711			1,225
Other long-term assets		122			103
Total assets	$	32,115		$	33,635

LIABILITIES, TEMPORARY EQUITY AND (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	3,268		$	2,514
Accrued salary, wages and benefits		3,322			2,325
Accrued expenses		4,555			4,789
Current maturities of debt (variable interest entity nonrecourse $6,831 and $2,750, respectively)		11,061			5,050
Total current liabilities		22,206			14,678
Long-term debt, less current portion (variable interest entity nonrecourse $0 and $3,553, respectively)		5,356			10,908
Derivative warrant liabilities		4,004			678
Deferred tax liability		34			34
Total liabilities		31,600			26,298

Commitments and contingencies

Temporary equity
Preferred stock, Series F, convertible, 20,000,000 shares authorized, 3,000 convertible shares issued and outstanding at June 30, 2016		551			-
Redeemable noncontrolling interest in Nutra SA		-			69
Total temporary equity		551			69

Equity:
Equity attributable to RiceBran Technologies shareholders:
Common stock, no par value, 25,000,000 shares authorized, 10,496,990 and 9,537,415 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively		263,468			262,895
Accumulated deficit		(257,597	)		(250,738	)
Accumulated deficit attributable to noncontrolling interest in Nutra SA		(1,599	)		-
Accumulated other comprehensive loss		(4,308	)		(4,889	)
Total (deficit) equity attributable to RiceBran Technologies shareholders		(36	)		7,268
Total liabilities, temporary equity and (deficit) equity	$	32,115		$	33,635

	2016			2015
Cash flow from operating activities:
Net loss	$	(8,254	)	$	(7,603	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,485			2,344
Stock and share-based compensation		477			402
Change in fair value of derivative warrant and conversion liabilities		852			(557	)
Goodwill impairment		3,024			-
Gain on resolution of Irgovel purchase litigation		(1,598	)		-
Loss on extinguishment of debt		-			1,904
Deferred tax benefit		-			(13	)
Interest accreted		403			339
Other		84			135
Changes in operating assets and liabilities:
Accounts receivable		(452	)		(363	)
Inventories		45			(263	)
Accounts payable and accrued expenses		2,107			1,432
Other		139			(119	)
Net cash used in operating activities		(1,688	)		(2,362	)

Cash flows from investing activities:
Change in restricted cash		1,921			-
Purchases of property		(417	)		(575	)
Net cash provided by (used in) investing activities		1,504			(575	)

Cash flows from financing activities:
Payments of debt		(20,276	)		(7,348	)
Proceeds from issuance of debt, net of issuance costs		18,560			-
Proceeds from issuance of debt and warrants, net of issuance costs		300			9,246
Proceeds from issuance of preferred stock and warrants, net of issuance costs		2,554			-
Payment of payroll taxes on stock-based compensation through shares withheld		(9	)		-
Net cash provided by financing activities		1,129			1,898

Effect of exchange rate changes on cash and cash equivalents		(38	)		50
Net change in cash and cash equivalents		907			(989	)
Cash and cash equivalents, beginning of period		1,070			3,610
Cash and cash equivalents, end of period	$	1,977		$	2,621

Supplemental disclosures:
Cash paid for interest	$	942		$	848
Cash paid for income taxes		-			-

	Three Months Ended						Six Months Ended
	2016			2015			2016			2015
NUMERATOR (in thousands):
Basic and diluted - net loss attributable to RiceBran Technologies shareholders	$	(6,608	)	$	(3,526	)	$	(6,308	)	$	(6,527	)
Dividend on preferred stock--beneficial conversion feature		-			-			(551	)		-
Basic and diluted - net loss attributable to RiceBran Technologies common shareholders	$	(6,608	)	$	(3,526	)	$	(6,859	)	$	(6,527	)

DENOMINATOR:
Basic EPS - weighted average number of common shares outstanding		9,231,619			9,167,789			9,223,651			9,160,999
Effect of dilutive securities outstanding		-			-			-			-
Diluted EPS - weighted average number of shares outstanding		9,231,619			9,167,789			9,223,651			9,160,999

Number of shares of common stock which could be purchased with weighted average outstanding securities not included in diluted EPS because effect would be antidilutive:
Stock options		353,186			260,632			355,286			262,468
Warrants		10,842,006			6,827,953			9,777,065			6,665,956
Nonvested stock		1,265,386			177,840			1,066,236			172,522
Convertible preferred stock		2,000,000			-			1,417,582			-

PART I. FINANCIAL INFORMATION			Page
	Item 1.	Financial Statements	3
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015	3
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2016 and 2015	4
		Condensed Consolidated Balance Sheets as of June 30, 2016, and December 31, 2015	5
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	6
		Notes to Unaudited Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
	Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3.	Defaults Upon Senior Securities	28
	Item 4.	Mine Safety Disclosures	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	29
Signatures			30

	USA Segment		Brazil Segment			Total Goodwill
Balance, December 31, 2015	$	790	$	2,468		$	3,258
Goodwill impairment		-		(3,024	)		(3,024	)
Effect of change in exchange rates		-		556			556
Balance, June 30, 2016	$	790	$	-		$	790

	June 30, 2016		December 31, 2015
Corporate segment:
Senior revolving loan	$	2,123	$	1,617
Senior term loan, net		840		1,407
Subordinated notes, net, maturing in May 2018, principal $6.3 million		6,320		6,310
Subordinated notes, net, due in July 2016, principal $0.2 million		215		205
Other		88		116
		9,586		9,655
Brazil segment:
Capital expansion loans		2,395		2,067
Working capital lines of credit		646		828
Advances on customer export orders		1,110		1,310
Special tax programs		2,650		2,064
Other		30		34
		6,831		6,303
Total debt		16,417		15,958
Current portion		11,061		5,050
Long-term portion	$	5,356	$	10,908