RiceBran Technologies (RIBT) 2010 Q4 法說會逐字稿

Greetings, and welcome to the NutraCea 2010 financial results conference call. At this time all participants are in a listen only mode. A brief session 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, Marilynn Meek.

Thank you. Welcome to NutraCea's 2010 financial results conference call. If you did not receive yesterday's press release announcing these results, please contact our office at 212-827-3746, and we will get you a copy and add you to the Company's distribution list.

A replay of today's call will be available through April 7, 2011 and can be accessed by dialing toll-free 877-660-6853 or 201-612-7415 and providing account number 284 and conference ID number 377017. The call will also be archived on NutraCea's website at www.NutraCea.com/FinancialResults.

On the call with us today are John Short, Chairman and Chief Executive Officer; Leo Gingras, President and Chief Operating Officer; Dale Belt, Chief Financial Officer; and Colin Garner, Senior Vice President of Global Sales.

Management will give opening remarks and then we will open the call for questions. Before we begin I would like to remind everyone that our discussion today will contain forward-looking statements, and that the cautionary language about forward-looking statements contained in the Company's press release on March 31, 2011 applies to any comments made on today's call.

Assumptions and other information that could cause results to differ from those set forth in the forward-looking statements can be found in NutraCea's filings with the Securities and Exchange Commission, including NutraCea's annual report on Form 10-K for 2010.

I will now turn the call over to John Short.

I want to welcome our shareholders and potential investors to today's conference call. And thank you all for your patience over the last two years as our management team took the Company through a reorganization and settled a substantial number of legal matters that needed to be dealt with. Finally we are happy, in fact, excited to say that all the time and energy expended on our reorganization process can now be refocused on our core businesses.

As many of you know, today is the first time since November of 2008 that NutraCea has held a conference call with live questions. The filing of our 2010 financial statements with the SEC yesterday brings us current with financial reporting. We are now in a position to continue to report on our financial progress and to communicate with our shareholders on a regular basis.

Our next conference call will be scheduled for mid May, about six weeks from now, after we file our Form 10-Q for the first quarter of 2011.

Before getting into today's topics I want to remind all of our listeners, and especially those who were not on the last call, that we held a conference call with no live questions just four weeks ago on March 1, 2011, immediately after the release of our 2009 financial statements.

On that call we described the restructuring of our Company that was executed in 2009 and 2010, which included the restatement of our financial statements for 2006, 2007, 2008, as result of investigations into questionable accounting practices, filing for protection to restructure under Chapter 11 of the US bankruptcy code on November 10 of 2009, the divestiture of non-core and underperforming businesses in wheat milling, nutraceutical distribution, infant cereal, and equine brands.

The use of proceeds of those divestitures to pay down about 70% of our total debt to date, and to cover the significant legal fees and expenses associated with the restructuring and the Chapter 11 process, the settlement of shareholder class-action and derivative lawsuits, the settlement of claims by the Securities and Exchange Commission with no financial penalties to the Company, our exit from court supervision under Chapter 11 on November 30, of 2010, and the investment by Alothon Group LLC through its AF Bran holding subsidaries in Irgovel, our Pelotas Brazil-based rice oil bio-refining business.

During the March 1 call we also outlined our go forward strategy that focuses our management and financial resources on core product and marketing opportunities related to stabilized rice bran, rice oil and derivative products and technologies related to those businesses.

The PowerPoint presentation used as background for the March 1 conference call, and the audio for that call, can be found on the Investor Relations page on our website at www.NutraCea.com. I urge those of you who missed that call to go to the website to review that PowerPoint and listen to the audio, as we will not repeat all of that information in today's presentation.

Now I want to turn the call over to Chief Financial officer Dale Belt to discuss some of the financial highlights of 2010.

I want to start by taking this opportunity to thank all of our shareholders who have been so patient and have endured the lack of access to current financial information. And I would be totally remiss not to publicly thank the financial team here at NutraCea who have worked so hard and diligently over the last several months in order to bring us current on our public reporting responsibilities.

Finally, I have to thank BDO USA, who became our new auditors in October of 2010. So having paid my proper respects, I will get into a few numbers.

As reported in our press release yesterday, we have made significant progress by reducing our net loss attributable to NutraCea shareholders from $32.1 million in 2009 down to a loss of $15.7 million for 2010. That represents a 51% improvement overall. It is important to note that the losses being reported include charges for impairment and loss on disposal of $2.8 million and $10.6 million for 2010 and 2009, respectively.

Our improved performance can be explained very simply by pointing out that our gross profits increased despite a slightly lower sales, and we significantly reduced our operating expenses in the categories of SG&A and professional fees.

Colin will cover the topic of sales more thoroughly, but I will set the stage with a few key numbers. SRB segment revenues for 2010 were $11.9 million as compared to $14.5 million for 2009. That is a decrease of $2.6 million or 17.8%. SRB segment revenues were down due to the sale of three non-core product lines -- cereal, equine and the nutraceutical private-label distribution business. Bio-refining revenues were up by $1 million to $19.7 million for 2010.

On the gross profit front we improved through a combination of driving down our plant operating costs and improving plant capacity utilization in the SRB segment, which Leo will address in his remarks.

But an important issue to keep in mind is the restructuring efforts that took place over the last year. As I have already stated, we shed our equine branded business. We sold the cereal productlines and associated equipment, and we sold the nutraceutical distribution business. The sale of these non-core assets contributed to improving margins and streamlining our operations at the plant level.

Bio-refining segment margins were slightly lower for the year, although the fourth quarter represented a significant improvement that we expect to continue due to plant efficiencies and better pricing.

Fourth-quarter gross profit margins improved from 11.7% as of the end of the third quarter to 16.4% for the three-month fourth-quarter period. Margins at Irgovel obviously include the higher depreciation associated with stepped-up basis relevant to the 2008 acquisition.

Regarding SG&A expenses, I think it is important for all of our shareholders to note the effort put forth by all staff at all levels in reducing corporate overhead. Because of the reductions in force we have many employees here who have stepped up and taken on extra duties. Plus we moved our offices to much more economical space that saves us $1.2 million a year in rent. We continue to carefully manage our overhead cost, even as we focus on growing our revenues.

I want to make one quick comment on professional fees. In the first half of 2009 an unavoidable spike in this expense occurred due to all of the legal matters that were being addressed -- the internal investigation ordered by the Board, the ensuing SEC investigation, the restatement of prior-year financials, and of course, the shareholder lawsuits. With those matter is now behind us, we should see more normalized expense typically associated with the a public company of our size.

Next I would like to address the impairment charges for a moment. To summarize, in 2009 we took charges on trademarks associated with our equine brands that were sold in two of our facilities -- the Phoenix building and the Lake Charles facility. These charges totaled $10.4 million in 2009.

In 2010 we took an additional impairment charge of $1 million on the Phoenix building, which was sold in September, and $900,000 charge for the Dillon facility.

At this time I am not aware of any further impairment charges. However, as required by the requisite rules of accounting and financial reporting, we continue to test all of our long-lived assets for impairment each reporting period. And I will leave further discussion of our operating facilities for Leo.

I would like to just conclude my remarks with a couple of comments about cash flow and liquidity in general. We continue to use cash on a consolidated basis. Both of our operating segments, SRB and bio-refining, generate cash but not enough to cover corporate outlays. In particular, we expect the bio-refining segment to experience strong operating cash flows in 2011, which are being reinvested into capital expansion and working capital needs in Brazil.

However, our US-based segments, which are corporate and SRB, are using cash. As I stated earlier, we continue to control and monitor those expenses closely.

Regarding our secured credit facilities, we paid Wells Fargo in full in 2010, and those security agreements expired at the end of last year. In January 2011 we put in place a modest factoring agreement that allows us to borrow against SRB segment-generated receivables as a partial replacement of our secured credit facility. We currently have no borrowings under the factoring agreement. It is fully available.

Irgovel has adequate working capital facilities in place for its needs. So the obvious question is how will we fund ongoing operations here? An additional $1 million from our minority interest investor in Nutra S.A. is expected to be received shortly. Nutra S.A. wholly owns Irgovel.

I am also happy to say that as of yesterday we were able to collect $800,000 on an account receivable that had previously been written off over two years ago. More importantly, we continue to look at ways to raise capital as needed, which may include equity or a convertible debt financing, or possibly bring in a minority investor at the subsidiary level, similar to the transaction we recently completed at Nutra SA.

The goal of any such transactions would be to provide long-term operational funding and pay our remaining unsecured credit or obligation of roughly $4 million.

At this point I will turn it over to you, Colin. Colin is our Senior VP of Sales.

I have just returned from an extensive sales trip in Europe and Asia. Last week I was visiting with our distributors and brokers in Shanghai, China. During my time there I also attended a very lively trade exhibition with Food Ingredients China. The FIC was an excellent venue to meet with our existing customers, distributors and brokers, and also to generate new opportunities for increased profitable sales in this part of the world.

Over the last few months I have personally spent many weeks working with our existing distributors' sales teams, the purpose of which was to further their knowledge and sales expertise in order to increase the sales of NutraCea's product range in Europe, the Middle East, Africa and Southeast Asia.

Our improved relationships and focus in these territories has led to new sales in recent weeks in several Central European countries -- the Czech Republic, Hungary and Romania, and in Southeast Asia, namely the Philippines, Vietnam and China. This realignment of our distributor and broker networks have strengthened our sales efforts in these countries.

Improving our sales coverage will continue to lead to additional profitable sales of stabilized rice bran and defatted rice bran. While I have been personally focusing on the international side of our business, my team had been diligent in promoting NutraCea to the animal and the human nutrition customers in the domestic marketplace.

My colleague, Leo Gingras, will discuss all sales from our Irgovel facility. But for now I would like to take this opportunity to discuss our core product line, namely the stabilized rice bran, SRB, in various key markets.

Currently one of the main drivers for us in the business-to-business industrial food ingredient area is with the major producers in the gluten-free baked goods marketplace. Our products are low glycemic, hypoallergenic and also lactose- and gluten-free. Current trends include improving gluten-free baked goods for celiacs.

SRB is also being used to further enhance the nutritional aspects of many products within the breakfast cereal and nutritional bar markets, to name just a few. It offers product formulates as a way to enhance the nutritional profile by being able to make a whole-grain claim. SRB continues to find acceptance in the general health and wellness market sector. This sector continues to attract premium supermarket shelf space, especially in Europe.

To continue with stabilized rice bran, for a moment, especially in the meat and the meatless sector, we are making progress selling NutraCea's SRB as an inclusion into the processed meat markets around the world. SRB is an innovative inclusion delivering functionality, affecting texture, emulsification, which is the oil and the water binding quality, and nutrition with no adverse effects in existing formulations.

We supply these novel ingredients as alternatives to other protein and vegetable sources into various processed meat formulations, such as nuggets and burgers, sausages and also meatless products in the vegetarian and the vegan arenas. We are included in multinational fast food menu items in Europe and Asia.

Within the coated and fried segments, NutraCea has discovered that the addition of our defatted rice bran, DRP, to batters and breading significantly reduces oil pickup in the exterior coating of products such as chicken nuggets during frying, therefore, significantly improving the nutritional profile as well as reducing costs for the manufacturers of such products. This is a product development project with our subsidiary Irgovel. There is still some work to be done, but it is new and it is an exciting opportunity for us.

As part of our margin improvement we were successful at the start of 2011 to significantly increase prices. Any customers on fixed contracts are not affected by this price increase.

I would like to take a few moments and say a few words on relationships. Within the animal nutrition business unit we are cementing our partnerships with the major suppliers in the equine -- the horse feed marketplace. Previously we reported that we divested our equine brands business in April 2010 in order to focus on business-to-business sales and not to compete with our retail customers in this area.

We have strengthened our salesforce in the US to develop sales into the non-equine markets, mainly companion animal, food animal and wildlife feeds, with expectations for continued growth for bulk and bank feed products into these important market sectors.

Finally, just a few words regarding sales administration. In order to better organize our sales effort and improve our sales management and sales administration processes, we now have a customer relationship management, a CRM system in place. Previously NutraCea did not have a formal sales procedure managing its customer relationships. We are developing a very respectable product pipeline, which is being managed by our teams throughout our businesses via this new CRM software.

Finally, thank you for your attention, and I will pass the call over to my colleague, Leo Gingras.

2010 was an interesting and busy year for our Brazilian bio-refining subsidiary Irgovel. Revenues were up approximately $1 million over the prior year, owing largely to a strong second half and especially strong fourth quarter in 2010. Sales have continued to be strong thus far in 2011 due to solid rice oil and defatted brand sales, both domestically and internationally. The facility continues to operate at capacity, which is currently about 70,000 tons per year of raw rice bran input.

The global vegetable oil market has experienced a tight supply and demand situation, which is likely to continue for some time. As we discussed on the last conference call, rising consumption of vegetable oil is based on during world populations' increased utilization of oils to produce biofuels, and increasing per capita consumption due to rising wealth in developing countries.

China is a good example of the effect of wealth on vegetable oil consumption. In the early 1990s per capita consumption of oil was 18 pounds per person per year. Today China's population consumes 55 pounds per person per year, a threefold increase in less than 20 years.

All this is creating considerable upward pricing pressure on oils in general, and rice soil is benefiting from this trend. In fact, commodity food prices in general have escalated dramatically in the last year. For example, corn prices have increased 60%. Soybean and wheat prices each went up more than 40%. Wholesale world food prices, tracked by the United Nations, increased by 25% in 2010, a new record.

As we discussed in the last conference call, agriculture is struggling to keep up with increasing demand for food, fiber and biofuels. We feel this will increase pressure to better utilize the crops we currently produce and will provide further support for our rice bran bio refinery model. As we all know, rice bran is an underutilized and renewable source of valuable food ingredients.

Due to the tightness in supply, edible oil buyers have been seeking longer-term contracts than they normally do. Last December we executed a sizable contract with a large multinational firm to provide rice oil to an Asian market at very favorable pricing through December of this year.

We also continue to export rice soil to the European market, and have retained our customers in Brazil, including our consumer business. As previously announced, we will be expanding our production capacity to at least 85,000 tons of raw rice bran input. This will provide at least 2,500 tons of additional rice oil for sale annually.

Defatted brand sales have also been strong. Currently we market about half of our defatted brand as compounded packaged animal feeds targeted at a number of species, including beef, cattle, dairy cows, horses, pigs and sheep. These products each have specific formulas and are blended products containing other ingredients besides defatted rice bran. Formulated by our staff veterinarian and sold under Irgovel labels these products are marketed in Brazil through a network of distributors and retailers.

Based on the general run-up in food and feed prices we increased prices for our feeds last November. One of the current projects we have underway is to expand the compounded feed business by installing equipment to produce a broader array of products and increasing our capacity to make these products.

The other half of defatted brand sales are bulk shipments to feed producers. Although profitable, these sales have much lower margins than we obtain for compounded feeds. Traditionally these sales have been to Brazilian and Uruguayan feed mills. Recently we have obtained significant export sales to Europe with better margins. Our longer-term vision is to develop a food ingredient business for defatted rice bran, thus converting low-margin bulk feed sales into higher-margin human food sales.

Export sales from Irgovel, both rice oil and defatted brand, have increased greatly over the last year as we have diversified from our traditional Brazilian market. At present about one-third of our total sales are export.

By participating in world markets we increase our opportunity to obtain better pricing for our products. An added benefit is that all export sales are in US dollars, which reduces our exposure to fluctuations in exchange rates between the Brazilian real and the US dollar.

As we discussed in the last conference call, we brought an investor into Irgovel. The Alothon Group, through their AF Bran Holdings subsidiaries, have already purchased a 36% minority position in Irgovel. Some of the funds from this transaction are being used to do the expansion at Irgovel. Alothon Group has a right to purchase up to a 49% interest.

Let me spend a few minutes describing the Irgovel expansion. More accurately, it actually has three components -- expansion, new products, and process efficiency improvements. In terms of expansion we will be increasing capacity of our oil extraction system by at least 20%, going from 70,000 tons to at least 85,000 tons of [broad] brand input annually. This will give us at least 2,500 tons of additional rice oil and 12,500 tons of additional defatted bran to market annually.

We will also be increasing the capacity of our distilled fatty acid plant by 25%. Distilled fatty acid is a co-product of oil refining that has strong demand and good prices in the Brazilian market.

The new compounded feed system I mentioned earlier will provide both an expansion and new product offering. This system will allow us to blend liquid ingredients, as well as dry, to formulate new lines of specialty food products to complement and supplement our existing product portfolio. The new system will also increase capacity for production of compounded feeds by about 50%.

We have three projects related to new products. We will be installing a dryer system to produce rice lecithin, another valuable co-product of oil refining. Rice lecithin is particularly useful to the food industry since it is nonallergenic and not derived from a genetically modified source.

The second new product offering is food-grade defatted rice bran. We currently have this product available and are beginning our marketing efforts.

A third new project is the installation of an oil distillation system that will produce what we call oryzanol content rice oil. Oryzanol is the name given to a group of potent antioxidants unique to rice oil. This new system will provide a more nutritious, higher-priced rice oil with powerful antioxidant properties.

We have two projects to improve efficiency. One is installation of a new centrifuge for oil refining. This new unit more efficiently separates components, thus improving product yields in addition to reducing maintenance expense.

Another project involves rapid analysis of raw bran quality to allow us to improve quality of feedstock going into the plant. This will improve process efficiencies, thus providing more product for us to sell and reducing processing expenses.

We anticipate that the construction phase of these projects will be completed within the next 16 months. Some will be completed fairly rapidly and others will take more time. We anticipate the rice lecithin, centrifuge installation, distilled fatty acid expansion, and brand quality improvements to be completed before the end of this year. The oil extraction, oil distillation and compounded feed projects will take longer to complete due to their scale and complexity.

It should be noted that while construction will be completed within 16 months, the full ramp-up from marketing new products and the anticipated 300% increase in EBITDA will phase in over the next 34 months.

Now a few words about future bio refineries. Prior to the problems that resulted in our Chapter 11 filing, we investigated a number of sites in the United States, Asia and South America as possible bio refinery locations. In addition, we did groundwork related to bran procurement and marketing of products from these locations.

We are now resuming these activities and plan to move ahead as funding becomes available. With regard to financing these plans we are considering a range of possibilities, including debt financing, and joint venturing with equity partners as we have at Irgovel.

I know many of you recall the joint venture agreement NutraCea signed with Bright Foods Group of China in 2008, and are curious as to its status. As you know, the intention was to construct a large rice bran bio refinery in China. Recently John traveled to Shanghai and met with Bright Foods to discuss the status of this venture. They remain interested in the project, and we are currently discussing a somewhat scaled-down version of the initially proposed project.

Since China produces 30% of the world's rice, and therefore, 30% of the world's rice bran, we look forward to developing a rice bran bio-refining business in this country.

As previously indicated, we are running three of our four stabilized rice bran facilities in the US. Our California plants are running at near capacity, and are our Mermentau, Louisiana facility is running at approximately 60% capacity. I need to mention here that run rates do vary based on customer needs, so the utilization rates move around a bit week to week.

Our Lake Charles Louisiana plant remains idle. The facility is in good condition and remains ready to start up quickly should demand require that. In the meantime we are considering a number of non-stabilized rice bran-related options to generate income from the Lake Charles plant.

I will close with a few words about the Dillon, Montana Stage 2 facility. We had initially thought of selling the plant, but have decided against that at present. The facility contains interesting process capabilities that we feel can be utilized in a number of ways. We are currently conducting R&D at the plant on a number of new product concepts.

John, I will turn the program back over to you.

Leo, Dale, Colin, Marilynn thanks for presenting today. And thanks again to our shareholders, not only for participating today, but also for your patience and support as we have worked through our restructuring.

I believe that today NutraCea has the strongest management team and staff in the history of the Company. We are proud to have completed the restructuring of our Company, and we are proud of the improvement in all aspects of our business in 2009 and 2010.

While we expect to show further improvement across all business segments in 2011 and beyond, we will not be satisfied until all business segments are generating positive cash flow and earning an attractive after-tax returns for our shareholders. All of the considerable energy and talent of our team is focused on that goal.

Before closing, I want to make a few announcements. First, on Wednesday we received the final decree from the bankruptcy court. The final decree officially closes out our Chapter 11 proceedings and puts a stop to the legal fees and costs related to that court case.

Second, I know you all appreciate the complexity of the process we have gone through and the task we have in front of us in a still challenging economic environment. As a result, we will not be providing earnings guidance or discuss the magnitude of improvements that we are working to achieve in the business.

Third, I want to let you know that Richard Koppes has joined our Board as an Independent Director effective yesterday, March 31. Rich is an attorney by training, who for many years was the number two in command at the California Public Employees Retirement System, CalPERS, a $230 billion pension fund. He served on a number of public company boards, and is one of the top authorities in the US on corporate governance issues.

Rich is a Program Fellow at the Rock Center for Corporate Governance at Stanford Law school, where he continues to be at the forefront of corporate governance matters for public companies. We are thrilled to have been able to attract a person of Rich's scope and experience to our Board.

Finally, I want to let everyone know that we have scheduled our next shareholder meeting for June 14, 2011, at the Scottsdale Plaza Resort in Scottsdale, Arizona. We will provide full details when we mail our proxy statement in a few weeks, but those who wish to attend can start making plans now. We look forward to meeting our shareholders in person in Scottsdale in June.

Marilynn, now let's go to questions.

We are now ready to open the line for questions. We ask that you limit your questions to one question initially. If time allows we will address additional follow-up questions. Rob, please go ahead with instructions.

(Operator Instructions). Robert Detwiler, Detwiler Fenton.

I started buying the stock when the Company was in bankruptcy, and I'm amazed by the opportunities that are available to you. Do you intend to have a roadshow with the Financial Relations Board taking you around? Because this is a story that has to be told and the more it is told the more the shareholders will benefit.

This is John Short here. We will direct traffic as the questions come in. I appreciate your question. The answer to your question is, yes. I think you guys will appreciate, or maybe you can't, the fact that we have gone through a whole series of things that have really gobbled up management time from the SEC investigations to shareholder suits, along with the restructuring.

We are now at the point where we can get out and start to tell the story of the business. I agree with you; we have great opportunities. And it is our intention over coming months to actually start non-deal roadshows.

Because the opportunities just seem so abroad that is a story that is waiting to be told.

We are excited about it. Yes. Can we go to the next question please?

(Operator Instructions). Thomas McCarthy, Raymond James..

Have you folks been considering doing a reverse stock split to make the share price more acceptable to institutions and possibly mutual funds that are interested in small-cap stocks?

John Short here. Thanks for your question. Let me answer you today by saying that as we prepare for our upcoming shareholder meeting, we are considering a series of options, many of which will be laid out as we get our proxy out, and we expect to that kind of end April. We are certainly looking at all of those options and considering the best way to proceed.

Robert Detwiler.

Just hearing what you're doing and viewing the global need for increased nutrition, am I correct in assuming that the rice bran opportunity represents one of the top opportunities for increasing nutrition and making it available to some of the countries in the world -- underdeveloped countries? China has a deficit, as I understand it, of about 20% of nutritional needs. This seems to be so substantially important, am I right that it probably is significantly so than other opportunities?

Let me hand that one to Leo.

Yes, you probably know my background goes back about 30 years in agriculture and food. And the situation is that the world food supplies are very tight. Well, it is the demand, that is obvious, and we see that reflected in pricing.

I believe this is -- I think it is an opinion shared by all of us here at NutraCea is that the world is going to have to get better at utilizing what it has. And something like rice bran that represents such a large volume of material worldwide really needs to be utilized for human food as opposed to animal nutrition more so.

So, anyways that -- and you mentioned China, and you're right, China is very deficient in terms of vegetable oil in particular. They import 70% of their vegetable oil needs. So that is an example of a country that could utilize an internal resource to help feed its population.

What is intriguing about your rice bran is that it is so -- it is not utilized because there has not been a technology until you guys developed it, and now you've got it. But it is there; it is thrown away. It is a waste otherwise.

Exactly. That has been the challenge with rice bran is to develop the technologies to really fully exploit its food value.

Okay.

I will throw in another thought on that on, Robert. As we all know, when you look at -- you can take anybody's projections, you can take UN, you can take private companies, but when you look at global population we have approaching -- somewhere approaching 7 billion people today, and the forecasts are for somewhere between 9 billion and 10 billion people by 2050.

And if you actually do the math on how you get from here to there, the potential for rice bran as a food source -- it is important. I would say it is necessary. We have to be able to take resources, and particularly what we feel are sustainable resources, to help fill that gap.

Now certainly rice bran can't fill all of that gap, but it can fill a significant portion of that gap. And when we say sustainable, if you think about rice, we already have the rice being grown. The water available in the patties is being harvested, etc., and the brand is being not discarded but used as low-end animal feeds.

If we can harness that, we don't need more water, we don't need more resources. I think you can make a very, very strong argument about sustainability and renewability as we convert rice bran from feed to food.

As a substantial investor I am just blown away by what I see as your opportunities.

We are excited as well. Thanks. Can we go to another question?

Nader Tavakoli, Eagle Rock Capital Management.

Congratulations on the progress you have been making. I just want to reiterate some of the comments with respect to getting the story out. I am just wondering if you can put a little more granularity on that in terms of when you think you might be able to get out and meet with investors and tell the story.

We intend to start in mid-April. I think you guys will appreciate we are still extremely focused on the aftermath of catching up on our financial reporting, because that effort has taken away fairly significantly from other things we need to focus our attention on. Having said that, later in the month of April we intend to go out and we intend to get out for a few days monthly over the next several months.

Okay, we look forward to meeting you and your management team. Do you think you're going to be retaining an Investment Relations professional in-house or what is your plan in terms of how to facilitate that?

We are actually working with Marilynn and the FRB people. We are very happy with that relationship. We will not be investing in an in-house person at this point in time. As you guys know from looking at our numbers, we still have a lot of work to do in the business, and we appreciate the support that we've gotten from Marilynn and her team.

I would disagree with the gentleman who suggested a reverse split. Obviously, the Board and you will have to think about that carefully, but I don't think that you want to take liquidity out of a stock that is already relatively liquid.

Our experience is not positive until you get the stock organically up to a higher price point, I don't think that is something you want to do. I don't think it will pay dividends and I think it will just deflate the entire enterprise value of the Company and decrease liquidity, which will hurt shareholders and yourself. So I would strongly oppose that, particularly at current prices. Thanks for (multiple speakers).

We appreciate your input. Thanks. Can we go to the next question?

Thomas McCarthy, Raymond James.

Would you please discuss your patent protection? And also, are there parts of your process that you have chosen not to be covered by patents, but just keep secret? As you are, I am aware that once patents are filed competitors start figuring out how they could reverse engineer it, and a lot of companies will prefer keeping part of their process secret.

Thanks for your question. Let me pitch that one to Leo.

Thanks for the question. Tom and everyone, for the basic machine that we use for stabilization of rice bran, which is a very nice machine, I would add, we have chosen to keep that as proprietary technology for the very reasons you mention. That as soon as you do a patent and you are essentially showing your blueprints of construction to the world, people have an opportunity to try to engineer around that. So we have chosen to keep that technology as proprietary.

However, we do have a number of patents already issued. I believe you know that. And for example, our Stage 2 process, our so-called Stage 2 process is patented. We have a number of patents that are underway right now that pertain to various processing technologies and utilization technologies that we have developed. (multiple speakers).

When will the patents expire?

Most of -- well, of course, it all depends. We have all different ages, but they all have considerable life left. None of them are close.

How do you define considerable?

Seven, eight years or more.

Thank you.

The other thing I would say in response to that is we have some recent patent filings that are quite interesting through our rice science, Rice Rx joint ventures as well. And we are moving ahead with the appropriate filing of those patents in various markets around the world.

Okay, thanks.

Tom, thanks for your question. Could we go to the next question?

John Pileckas, Cherry Hill Sales.

I was an investor from many years ago. And, again, all these folks have reiterated what a great concept you have any great opportunity. I think one of the gentleman kind of answered my question in that I see tremendous opportunities overseas, and with the hunger in the world, and how do you plan to work that to your advantage in the marketplace?

John, thanks for your question. Let me ask Colin to address that, and then Leo feel free to comment as well.

This is Colin Garner, and I would be happy to try and help with the question. In terms of the great concept and the great opportunity, as you posed it, basically overseas if we split the world just into two, just for ease in answering the question, as I mentioned in my script earlier on most definitely, I have spent some considerable time in my short tenure here within NutraCea talking to opportunities in various countries in Asia.

And we are, and are proving to be, very successful in quite a short space of time in places like China and Japan and other parts of Vietnam. So the other areas of the world, of course, is Central/Eastern European countries where we are finding usages for our products in meat.

So the more we talk and the more we promote and the more we try to sell the product is recognized, and so far we are getting traction in various parts of the world.

Excellent. Well, I travel in China quite a bit, and I see the starving people. And that you folks are making nice transition from your financial problems.

Again, I am a pretty big investor from way back, so I am interested. And I get a lot of excitement from your current management staff. I think you are kind of -- you are wrestling with this financial thing and it looks like you're almost coming to closure with this.

But, again, a lot of the callers that I have been listening to, this is phenomenal opportunities. And I do travel the world and I see food is a big issue. And a lot of these processes that you have, we just -- I think you've got to find a way to make this work for you and generate income.

Again, and two or three of your callers went through this, but tremendous opportunity. It looks like a great process, and God willing and the creek don't rise, you exit this Chapter 11, etc., and can focus on what is out there.

So, again, I am a pretty good sized investor and I don't plan on selling anything. I am excited by what I hear, and hopefully you folks can move on and really make a mark.

Thanks for your question. Let me wrap up with one final comment. This is a game -- there is huge potential here. And I think people who invested back in the old days all know that. But at the end of the day this is a game of blocking and tackling. You've got to do this customer by customer, product by product, application by application. And we've got to focus our resources on the biggest and best opportunities and convert them.

We spent a lot of time in the last year and a half, two years, restructuring the business, getting rid of those non-core businesses, so that we can focus on what we believe is that big long-term opportunity in core, and we have started the blocking and tackling. So let me stop there and ask that we take another question.

[Richard Sonderson], private investor.

I am really ecstatic about what you have accomplished in the last year and a half, and two years. But when I look at what is there now I realize you have been busy staying away from the alligators and haven't had much time to drain the swamp recently.

But your margins are really terrible right now. And your sales growth, you're talking about great opportunities, but I see no evidence in the results to date that substantiate that. So that is where my concerns are. Do you have any comment on that? I mean, the margins are not very good.

Sure, let me respond. Thanks for your question. We divested a number of businesses over the last couple of years. If I take a couple of examples, we divested -- let me just say as we divested a couple of businesses, we divested businesses that were significantly lower margin. We have nice pickups in margin because the underlying core businesses had better margins.

Colin mentioned earlier in his prepared remarks that we have implemented some price increases during the first portion of this year. And we agree with you, our margins are not at the levels we would like them to be at, but they are improving very significantly.

Leo also mentioned that down in Brazil back in November we implemented price increases across all of our feed divisions -- very significant price increases that are biting and contributing to those strong fourth-quarter results.

And in oil we have, I would say, been the beneficiary of those tight global supplies that Leo described in his prepared remarks. And we are seeing very nice increases in pricing and margin in those areas.

We agree with you. If you think about Dale's comment on the financial side, we have a business that has contributing margin in bio-refining and contributing margin in SRB, but not enough to cover our corporate overheads. So what we have been doing is reducing those corporate overheads, focusing on growing sales and growing margins.

A little bit buried, I think in the numbers you see, but we divested a number of businesses, and those businesses have lower margins, and we have retained the businesses that we think have good margins, margins that could be improved and do represent significant opportunity for us in the future.

Are we where we want to be? Not by a long ways. Are we headed in the right direction and improving in all of those areas? Yes. Let me leave it there and see if there are additional questions.

[George Baldwin], private investor.

Hello from Hanover, New Hampshire, where it is snowing. I am wondering about your competitive situation in your industry. Are you a small outfit that is pioneering a lot of this or are there a lot of other producers of rice bran oils that are ready to pounce on you if you show your head above their horizons?

First of all, are you in Hanover, New Hampshire today?

I am.

Well, thank you for calling us from Hanover, New Hampshire. You guys on the call may or may not know that I went to Dartmouth as an undergraduate, which is in Hanover, New Hampshire.

I do know that.

I was back recently, and you live in a wonderful place. Let me ask Leo if he will pick up the answer to that question.

I also want to point out that I was born and raised in Manchester, New Hampshire, so lots of connections here. As far as competition, let's start with the rice bran oil piece of that. There are a few small players out there in the rice bran oil business -- a few places in India, for example. And of course my former employer operates a facility as well.

But by and large it is such an untapped potential. There is just a few small players, including ourselves. And there is just a lot of room for growth there. In the edible oil business your competition isn't just rice oil, it is every other kind of oil that is out there. So you just find your place and you market your product.

The good news for us is that rice oil has some very unique properties, as I mentioned in the prepared text. And it is also very high quality oil, so it is really highly regarded around the world.

As far as stabilized rice bran, I would say that in that area we are quite unique. We have a process that can make very high-quality food-grade product, which as far as I know, there is really not anyone else out there that makes a product of that type. I am sure, Colin, maybe you would want to speak to that in your travels.

Yes, thanks Leo, I will. The competition is -- there are people out there always trying to buy bite our ankles. However, in terms of a product that we are selling, it is all about quality. And it is all about service and it is all about price too.

So from the quality perspective it is very clear to me that our quality is excellent in the marketplace. We are doing very, very well. And I can assure you that quality issues really does not take up any of my time. So I do not have to focus on that, I allow my colleagues to focus on that. And we do put excellent quality products into the marketplace premiere for

In the food industry, which is a core focus for us, quality is paramount. And the quality that is being used in meat products and other areas of our business is being well received by the marketplace.

I think the last thing, I would throw on top in terms of a comment -- and you can certainly -- heard these in Leo's prepared remarks. There aren't that many guys out there in the rice bran oil business globally, so there is a big opportunity. But more importantly, as part of that global oil complex, we are in a situation where consumption is running ahead of this year, but even with supply. And we would expect that to continue for many years into the future in the whole edible oils complex.

If you looked at the numbers -- you're listening to the numbers that Leo was describing in terms of increasing consumption with increasing wealth, there is not excess supply of edible oil on the planet. And when you put that in context of 7 billion people going to 9.5 billion people, I think over the short, medium and the long-term we have a very favorable, I will say, market outlook for our oil products. Leo.

Not to belabor the point, but I would just add a couple of points there. If you look at the vegetable oil situation in the world, by and large the increase in demand over the years has been met by increased plantings of soybeans and oil palms in the tropical parts of the world, largely Brazil, in the case of soybeans, and places like Indonesia and Malaysia for oil palms.

The problem with that has been essentially people are cutting down rain forests to plant crops. And politically and just environmentally that is becoming very unacceptable, so you're seeing a number of activities in the international community to stop that.

So essentially the two big oil types that have really met the gap so to speak, they are being slowed down considerably. So you can see that there is just going to -- in my opinion, there is simply going to be a need for some new alternatives, including rice bran oil.

Let's leave that question there. Thanks for that question. And could we go on to the next question?

[Paul Dikery], NutraCea.

I am a private investor. I used retail outlets like Trader Joe's and GNC, and I have noticed that the olive oil has shelf space, but I haven't seen any rice bran oil. Is that something that NutraCea might consider marketing to?

A very good question. We actually have developed a retail product that we call Pelotas brand rice bran oil, because of the city that it comes from. But honestly in everything else that we have been trying to get done in the last year plus we haven't really been able to focus on getting it into the stores. But it is on our list of things to do. And obviously, in Brazil we do have a consumer market there.

Thanks for the question. Can we go on to the next question?

[Donald Suley], private investor.

This is for Leo or Colin, I have been an investor for about four or five years now, and I have always wondered what is the shelf life of rice bran from the time it comes out of the process through distribution through shelf life? Is it sufficient for most of these food manufacturers? What is the actual shelf life?

A very good question. We guarantee our customers a shelf life of one year. But in reality, I think Colin will back me up on this, in reality food processors very really keep any ingredients around for more than a month. They don't keep inventory. So it is pretty much in or out.

But we do guarantee year, and so we have that. And the same is also true in rice bran oil, that we would have a one-year shelf life.

Okay, then just a follow-up on that is, is that one year sufficient for them to be comfortable with one year?

Certainly, certainly.

It is very standard in the food -- in the industrial food ingredients marketplace. Not all products in the warehouses around our major manufacturers have 12 months, but the majority do, some have less. But it is unusual to have more than 12 months on an industrial ingredient that is used in the food chain.

Okay, thank you.

Thank you, and can we have the next question?

[Eric Sanchez], private investor.

Thanks for taking my call. Regarding your interest in joint venture possibility with Bright Foods in China, what sort of competencies are Bright Foods looking for you to meet in order to escalate a prospective start date for the joint venture in your business? I guess my main question is mainly around a forecasted start date for construction.

We don't have a forecasted start date for construction. I think you'll appreciate as we went through the Chapter 11 our joint venture was put on hold. That joint venture was signed in June 2008. And, of course, a lot has happened in the world between June 2008 and today.

I was with the Bright Foods people last week in Shanghai, when Colin and I were at (inaudible) China, and during the meetings the feedback from the Bright guys is definitely interested for all the reasons we just discussed.

They have a growing population, forecast to be the fastest-growing population in the world over the next several years, along with India. They have to feed them. It is a strategic resource, etc., all of the things we know about the market opportunity.

One of the things you May not know, but we are happy to share, is that China imports to date -- Leo, I'm going to say about 70% of the oil and oil seed that they need to cover their edible oil needs. Is that a fair number?

That is accurate, yes.

And they have all of this rice bran in country. There is a great opportunity to have a local source, foreign exchange savings, all of those things. So this is of absolute interest.

One of the things that we are doing as a management team in our conversations with Bright is actually looking at project scope. And one of the things that we believe is that we may be better off with a slightly smaller scope in terms of project size and doing multiple projects in multiple locations in China, instead of one larger one in one location.

So as we sit today discussions continue. They are positive; there is a serious interest from both sides in proceeding, but we do not have a start date for breaking ground on a project.

Thank you for your feedback.

Sure. Could we have the next question?

[Joanne Abrams], private investor.

I have been an investor since 2006. I have continued to invest into the Company because of all the positive things that were told to me when I first started to invest.

I was given a cosmetic product, and I'm a person that reads ingredients, and this came from Bath & Body Works and it is a body moisturizing cream. And I was really taken aback when I started reading the ingredients in it, and one of the ingredients in the product is rice bran oil.

I was curious to know whether or not the Company was entertaining the idea of going into using rice bran oil for cosmetic products?

Leo, will you handle that one?

Sure, sure. In my previous life with another company we actually did sell some rice bran oil to the cosmetic industry, although in smaller quantities. It is a wonderful cosmetic ingredient.

I will just roll back to what I said a little bit earlier about the oil distillation project at Irgovel that will allow us to make an oil that contains a high level of oryzanol. In my view that would be an excellent cosmetic ingredient because of the antioxidants present in that product. So that would certainly be one of the markets we would look at once that system is online.

Thank you. And one other quick question. I may be totally ignorant as far as even asking this question, has the Company entertained in co-oping with farmers to have the rice produced exclusively for the Company?

Well, in the case -- you know, of course we are interested in only a portion of the rice, the rice bran portion. And that only represents about only 10% of what rice is coming from the field. So our approach has been rather than dealing with farmers, we actually will deal with major rice milling companies and establish relationships with them so that we can obtain the rice in sufficient quality and quantity. And, of course, at the right price to make everything work.

So we have -- and just so you know, I come from the rice industry. And so we have a number of contacts around the world, and good relationships with a lot of rice millers.

Okay, thank you.

Can we go to the next question.

[Richard Sonderson], private investor.

I'm very happy -- as an investor who suffered over the last several years, I am very happy to see that the members of the management who are there now that appear to be both companies and honest. And that hasn't apparently been the case in the past.

I am wondering, given that there is several members of the Board of Directors who have been there from the past, and who to have to be tainted by what went on under their direction, I am wondering whether or not these Directors are going to resign?

Let me respond. First of all, we are always interested in having the appropriate talent and people on our Board. You may have seen an announcement this morning that Richard Koppes joined our Board, and I commented on that at the end of our prepared remarks. We think Richard is a great add to the team.

One of the things that I would simply caution our investors, and by the way, I am one of them, I bought stock in the Company back in 2006, I think, the first time. I saw it go up and down, and I feel the pain as much as you do. I think, Leo, you are in that same boat. So we understand where you're coming from.

But I think it is important to be very careful about the way you discuss people and their reputations. There was a very detailed and in-depth investigation of this Company internally and by the SEC. None of the directors were named in any of those investigations. None of them received [Wells] notices. And hence I think we conclude that there is no wrongdoing by any of the Directors.

Please keep that in mind. It is, in my view, extremely important. I will say that since coming onboard our Board has been instrumental in helping us and partnering with us to work through an extremely complicated and difficult process here.

In addition to Rich, John Quinn joined us, I am going to say a year ago April approximately, as the Chairman of our Audit Committee. And John, of course, brings tremendous knowledge, experience, scope and depth in the public accounting world to our Board.

So when we look at our Board today, I will tell you from a management point of view, and I have been involved in a few public companies, our Board works. Our Board is actually doing a lot of work, and they are doing the work that has helped us facilitate the restructuring and position the business to take it forward.

So, Richard, while I feel your pain, and I mean that financially, personally financially, I think we should all be very, very careful when we discuss people's reputations. And as I said, there are no issues that have come out of the in-depth investigation that indicate any wrongdoing by any of our Board members. Can we go to next question?

Bernard Schmitt, Market Pulse.

Guys, I really don't have a question, I just want to say that like in John's position a little bit, I became a shareholder of NutraCea in 2004. I have added to my position over time, and watched the growth and some of the missteps of the Company.

It seems like the last couple of years you guys have done a nice job. The only thing else I really to say is that I just hope -- in my opinion I think if the Company continues on this path there is obviously -- we all think there is a lot of potential here.

I think the stock price is going to take care of itself over time. It is probably not going to be an overnight process. I just hope -- you guys are going to do what you're going to do at the end of the day. I just hope the Board, or whoever, you guys don't reverse split the stock.

So it is a pretty big concern of myself and some of the other shareholders. But at the end of the day I know you guys and ultimately make those decisions. And hopefully -- again, I am from the school that over time the stock is probably going to take care of itself as long as the Company has the fundamentals to back that up. So that is really all I have to say, and nice job so far.

Thanks for your comments. We will certainly take them into consideration. Can we go to the next question.

Gentlemen, we have reached the end of our allotted time for the question-and-answer session for today. I will to turn the floor back to you for closing comments.

Perfect, Rob, thank you. I simply want to say to all the folks who were on today, thank you for joining us. To Nadar's question earlier, we will be out on non-deal roadshows starting later this month. We look forward to getting out in front of the market and telling people our story.

I think to Bernard's comment here at the end, we have gone through -- we have done a lot of work and we are proud of the work that we have done in terms of restructuring. But we have a lot of work to do to build the fundamental value of the business to the potential that exists in the marketplace, and we are very focused on doing that blocking and tackling.

So happy that we've been able to make it through the Chapter 11 and put ourselves in a position to take the business forward, and plenty of work to do going forward. So with that we will wrap up the call for today and thanks to everybody for joining us.

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