<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
June 30, 2000
Commission file number 0-24285
THE RICEX COMPANY
68-0412200
Incorporated in Delaware IRS Employer Identification No.
1241 Hawk's Flight Court, El Dorado Hills, CA 95762
Registrant's Telephone No. (916) 933-3000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes___X___ No ______
Number of shares of common stock outstanding as of June 30, 2000:
35,207,921
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check One):
Yes _____ No ___X___
<PAGE>
The RiceX Company
(formerly Food Extrusion, Inc.)
Form 10-QSB for the Quarter Ended June 30, 2000
Index
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated Balance Sheet at June 30, 2000 3
b) Consolidated Statements of Operations for the
quarter and six month periods ended June 30, 2000
and 1999 4
c) Consolidated Statements of Cash Flow for the
quarter and six month periods ended June 30, 2000
and 1999 5
d) Notes to financial statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation
Part II. Other Information
Item 2. Changes In Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K. 13
a) Exhibit 27, Financial data schedule
b) Reports on Form 8-K
Signatures 19
</TABLE>
2
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THE RICEX COMPANY
(formerly Food Extrusion, Inc.)
CONSOLIDATED BALANCE SHEET
June 30, 2000
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,147,715
Trade accounts receivable 724,248
Inventories 189,812
Deposits and other current assets 107,234
----------------
Total current assets 2,169,009
PROPERTY AND EQUIPMENT, net 2,745,599
OTHER ASSETS 91,986
----------------
$ 5,006,594
================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Note payable to shareholder $ 1,850,000
Accounts payable and accrued liabilities 498,629
----------------
Total current liabilities 2,348,629
CONVERTIBLE NOTE 2,500,000
----------------
Total liabilities 4,848,629
----------------
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $.00l per share,
10,000,000 shares authorized,
no shares issued and outstanding -
Common stock, par value $.001 per share,
100,000,000 shares authorized,
35,207,921 shares issued and outstanding 35,208
Additional paid-in capital 25,190,290
Accumulated deficit (24,013,063)
Deferred expenses relating to equity issuance (1,054,470)
----------------
Total shareholders' equity 157,965
----------------
$ 5,006,594
================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
THE RICEX COMPANY
(formerly Food Extrusion, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Quarters ended Six months ended
------------------------------- ----------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Revenues
Sales $ 950,310 $ 1,030,868 $ 1,818,047 $ 1,804,509
Royalties 3,395 12,915 12,564 20,392
------------- ------------- ------------- ------------
953,705 1,043,782 1,830,611 1,824,901
Cost of sales 513,162 573,919 1,088,791 1,013,846
------------- ------------- ------------- ------------
440,543 469,864 741,820 811,055
Research and development expenses 122,174 193,478 175,167 349,060
Selling, general and administrative expenses 247,804 328,794 555,305 635,734
Stock option and warrant compensation to employees 24,948 - 49,896 -
Professional fees 95,181 107,280 574,807 187,927
------------- ------------- -------------- ------------
Loss from operations (49,564) (159,689) (613,355) (361,667)
Other income (expense):
Interest and other income 15,809 1,035 71,648 5,211
Interest and other expense (256,019) (325,648) (511,964) (650,603)
------------- ------------- ------------- ------------
Loss before provision for income taxes (289,774) (484,302) (1,053,671) (1,007,059)
Provision for income taxes (800) (800) (800) (800)
-------------- -------------- ------------- -------------
Net loss $ (290,574) $ (485,102) $ (1,054,471) $ (1,007,859)
============= ============= ============= =============
Basic and diluted earnings per share:
Net loss per share $ (0.01) $ (0.02) $ (0.03) $ (0.05)
============= ============= ============= =============
Weighted average number of shares outstanding 36,364,861 22,098,785 36,241,547 22,063,391
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
THE RICEX COMPANY
(formerly Food Extrusion, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
------------------------ ---------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Cash flow from operating activities:
Net loss $ (290,574) $ (485,102) $(1,054,471) $(1,007,859)
Adjustments to reconcile net loss to
net cash from operating activities
Depreciation and amortization 172,904 176,268 335,733 352,005
Shares, warrants and options issued for
compensation and services 48,948 25,000 130,023 25,000
Amortization of investor relations fees - - 281,527 -
Amortization of prepaid processing fees 19,531 39,062 -
Accretion of debt discounts - 28,149 - 56,298
Amortization of prepaid interest and debt
issuance costs 254,972 80,898 509,945 161,796
Net changes in operating assets and liabilities
Trade accounts receivable (147,592) (153,380) (209,549) (234,396)
Inventories 87,610 (173,695) 120,377 (260,040)
Deposits and other current assets (56,709) (40,310) (81,409) (40,218)
Deferred debt issuance costs - 193,697 - 387,394
Accounts payable and accrued liabilities (74,957) 246,439 (40,832) (66,798)
------------ ----------- ------------ ------------
Net cash from operating activities 14,133 (102,036) 30,408 (626,818)
------------ ----------- ------------ ------------
Cash flows from investing activities
(Purchases) sales of property and equipment, net (72,971) (4,481) (96,392) (4,481)
Collection on note receivable - 38,100 - 69,000
------------ ----------- ------------ ------------
Net cash from investing activities (72,971) 33,619 (96,392) 64,519
------------ ----------- ------------ ------------
Cash flows from financing activities
Proceeds from issuance of common stock - 400,000 126,000 400,000
Proceeds from issuance of long-term debt - - - 700,000
Proceeds, issuance of common stk, exercise of options (1,500) (249,975) (1,500) -
Issuance of common stock on equipment purchase 68,750 - 68,750 -
Principal payments on long-term debt - (4,153) - (1,297,365)
Private Placement financing expenses 34,244 - (9,600) -
------------ ----------- ------------ ------------
Net cash from financing activities 101,494 145,872 183,650 (197,365)
------------ ----------- ------------ ------------
Net (decrease) increase in cash and cash equivalents 42,656 77,455 117,666 (759,664)
Cash and cash equivalents, beginning of period 1,105,059 321,183 1,030,049 1,158,302
------------ ----------- ------------ ------------
Cash and cash equivalents, end of period $ 1,147,715 398,638 1,147,715 398,638
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
THE RICEX COMPANY
(formerly Food Extrusion, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The RiceX Company ("RiceX"), formerly Food Extrusion, Inc., was incorporated in
California in 1989 and in 1998 was reincorporated in Delaware and changed its
name to The RiceX Company. RiceX has a wholly owned subsidiary, Food Extrusion
Montana, Inc. (FoodEx Montana). The consolidated financial statements include
the accounts of RiceX and FoodEx Montana (collectively "the Company"), after the
elimination of all inter-company balances and transactions.
The Company is an agribusiness food technology company, which has developed a
proprietary process to stabilize rice bran. RiceX is headquartered in El Dorado
Hills, California and has stabilization equipment located at two rice mills in
Northern California. The Company purchases raw rice bran from these two mills.
Mill employees, under Company supervision, operate the Company's equipment to
stabilize rice bran. The Company pays a processing fee to the mills for this
service. Under an agreement with one of the mills, that mill may use the
Company's equipment to stabilize rice bran for its customers in exchange for the
payment of a royalty fee to the Company.
FoodEx Montana is engaged in the business of custom manufacturing grain based
products for food ingredient companies at its production facility in Dillon,
Montana. The facility has specialized processing equipment and techniques for
the treatment of grain products to cook, enzyme treat, convert, isolate, dry and
package finished food ingredients. The soluble and fiber complex form of the
Company's rice bran products are produced at the Montana facility.
There have been no changes in the Company's significant accounting policies as
set forth in the Company's audited financial statements for the year ended
December 31, 1999, which were included in the Company's Form 10-KSB. These
unaudited financial statements for the six months ended June 30, 2000 have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for the six months ended June 30, 2000
are not necessarily indicative of the results expected for the full year.
2. PROPERTY AND EQUIPMENT
At June 30, 2000, property and equipment consists of the following:
<TABLE>
<S> <C>
Land and buildings $ 367,961
Equipment 4,234,173
Leasehold improvements 381,642
Furniture and fixtures 225,417
-------------
5,209,193
Less accumulated depreciation and amortization (2,665,494)
-------------
2,543,699
Equipment not placed in service 201,900
-------------
$ 2,745,599
=============
</TABLE>
6
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3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At June 30, 2000, accounts payable and accrued liabilities consist of the
following:
<TABLE>
<S> <C>
Trade accounts payable $ 154,689
Other accrued liabilities 343,939
-------------
$ 498,628
=============
</TABLE>
4. DEBT
At June 30, 2000, debt consists of the following:
<TABLE>
<S> <C>
Note payable to shareholder, stated interest rate of 18%,
Interest prepaid in common stock, due December 2000 1,850,000
=============
Convertible Note:
Convertible note payable to a venture capital firm secured
by FoodEx Assets, Non-interest bearing 2,500,000
=============
</TABLE>
In June 2000, the Company reached an agreement with a venture capital firm to
convert a $2,500,000 note for 3,571,429 shares of the Company's common stock.
In connection with this conversion, the Company agreed to issue a warrant to
purchase 3,571,429 shares of the Company's common stock at $.70 per share,
exercisable for five years. The Company is finalizing a definitive agreement
with this venture capital firm which could invest an additional $2,500,000 of
equity financing.
5. SHAREHOLDERS' EQUITY (DEFICIT)
SHARES ISSUED FOR SERVICES
During April 2000, the Company issued 14,134 shares of common stock to an agent
for introducing investors to the Company. The value of the common stock was
approximately $10,601 and is recorded in shareholders' equity. The shares were
issued without registration under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
During June 2000, the Company issued 32,000 shares of common stock for services.
The value of the common stock was $24,000 and is recorded in shareholders'
equity. The shares were issued without registration under the Securities Act in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
SHARES ISSUED FOR PRODUCTION EQUIPMENT
In May 2000, the Company issued 100,000 shares of common stock to acquire
equipment from one of its suppliers. The value of the common stock was $68,750
and is recorded in shareholders equity. The shares were issued without
registration under the Securities Act in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
SHARES ISSUED IN PRIVATE PLACEMENT
During the first six months of 2000, the Company issued and sold 168,000 shares
of its common stock to private placement investors for $114,400, net of
financing fees which were $9,600. Also in connection with the transaction, the
investors received warrants to purchase up to 168,000 shares of the Company's
common stock. The warrants are exercisable at $1.00 per share during the first
year from the date of issuance, $1.25 per share during the second year from the
date of issuance and at an exercise price of $1.50 per share during the third
year from the date of issuance. The warrants expire three years from the date of
issuance. The shares were issued without registration under the Securities Act
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
7
<PAGE>
SHARES RETURNED TO THE COMPANY PURSUANT TO RESCISSION
During June 2000, the Company and three executive officers rescinded the
exercise of 2,700,000 stock options priced at $.72 per share and promissory
notes in the total amount of $1,944,000 given as payment for the exercise price.
On account of the rescission, the executive officers returned to the Company the
shares of common stock purchased pursuant to the exercise of the options. The
rescission of the exercise of the options restores the Company and the executive
officers to the positions they occupied prior to the exercise. The 2,700,000
stock options may be exercised in the future at the $.72 per share exercise
price until expired.
6. NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding during all periods presented.
Options and warrants are excluded from the basic net loss per share calculation
because they are currently anti-dilutive.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is a discussion of the consolidated financial condition of The
RiceX Company and the results of operations for the quarters ended June 30, 2000
and 1999.
When used in this report, the words "believe," "expect," "anticipate" and
similar expressions, together with other discussion of future trends or results,
are intended to identify forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such statements are subject to certain risks and uncertainties, including
those discussed below that could cause actual results to differ materially from
those projected. These forward-looking statements speak only as of the date
hereof. All of these forward-looking statements are based on estimates and
assumptions made by management of the Company which, although believed to be
reasonable, are inherently uncertain and difficult to predict; therefore, undue
reliance should not be placed upon such statements. The following important
factors, among others, could cause the Company's results of operations to be
adversely affected in future periods: (i) increased competitive pressures from
existing competitors and new entrants; (ii) increases in interest rates or the
Company's cost of borrowing or a default under any material debt agreements;
(iii) deterioration in general or regional economic conditions; (iv) adverse
state or federal legislation or regulation that increases the costs of
compliance, or adverse findings by a regulator with respect to existing
operations; (v) loss of customers or sales weakness; (vi) inability to achieve
future sales levels or other operating results; (vii) the unavailability of
funds for capital expenditures; and (viii) operational inefficiencies in
distribution or other Company systems. Many of such factors are beyond the
control of the Company. There can be no assurance that the Company will not
incur new or additional unforeseen costs in connection with the ongoing conduct
of its business. Accordingly, any forward-looking statements included herein do
not purport to be predictions of future events or circumstances and may not be
realized. In addition, assumptions relating to budgeting, marketing,
advertising, litigation and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions based on
actual experience and business developments, the impact of which may cause the
Company to alter its marketing, capital expenditure or other budgets, which may
in turn affect the Company's financial positions and results of operations.
QUARTERS ENDED JUNE 30, 2000 AND 1999
Consolidated revenues in the quarter ended June 30, 2000 of $954,000
decreased $90,000, or 9%, from the same period last year. The sales decrease
is primarily attributed to a decrease in one product category, solubles.
Stabilized Rice Bran ("SRB") regular sales showed an increase in revenue of
$16,000 to $640,000, while
8
<PAGE>
solubles decreased $98,000 to $195,000, versus 1999. SRB fine increased $2,000
to $30,000 and fiber decreased $6,000 to $86,000 compared to sales for the
quarter ended June 30, 1999.
Gross margins for the quarter ended June 30, 2000 were $441,000, or 46%,
compared to $470,000, or 45%, during the same period last year. The decrease
in margin dollars was the result of decreased revenues in the same period
last year. Gross margins on the Company's various products vary widely and
the gross margins are impacted from period to period by sales mix and
utilization of production capacity. The Company expects that gross margins
will improve as sales volumes increase.
Research and development ("R&D") expenses reflected a decrease for the
quarter ended June 30, 2000 compared to the same period last year. R&D
expenditures decreased $71,000, or 37%, from $193,000 for the quarter ended
June 30, 1999 to $122,000 for the current quarter. The reduction of R&D
expenses is mostly due to the termination and subsequent transfer of
technical employees and associated expenses to a nutraceutical company that
was granted an exclusive license to sell RiceX products.
Selling, General, and Administration ("S,G&A") expenses were $249,000 for
the quarter ended June 30, 2000, compared to $329,000 for the quarter ended
June 30, 1999, a decrease of $80,000, or 24%. The decrease was primarily
attributed to decreases in payroll and payroll related expenses.
Stock option compensation expense is a non-cash charge relating to the issuance
of favorably priced stock options to employees and directors to attract and
retain key personnel to the Company. The charge represents the difference
between the exercise price and the trading value on the date of the grant. The
difference is recognized over the vesting period of each grant, which generally
ranges from two to three years, except for the directors' grants, which vested
immediately.
Professional fees decreased to $95,000 for the quarter ended June 30, 2000
compared to $107,000 for the second quarter last year. The decrease of $12,000,
is due primarily to reductions in legal, accounting, and printing expenses
associated with various SEC filings, annual shareholders reports, and proxy
statements compared to this period last year.
Interest expense for the quarter ended June 30, 2000 was $256,000 compared to
$326,000 for the same period last year. In both quarters ended June 30, 2000 and
1999, these charges primarily represent the amortization of certain debt
issuance costs and accrued interest. The $70,000 decrease for the quarter ended
June 30, 2000 compared to the quarter ended June 30, 1999 is associated with the
reduction of amortized and accrued interest costs on debt that was paid off in
November 1999.
For the quarter ended June 30, 2000, the Company's net loss was $291,000, or
$.01 per share, compared to a net loss of $485,000 or $.02 per share, a
substantial improvement of $194,000 over the same period last year. The
improvement for the quarter is primarily due to successful efforts to reduce
fixed overhead expenses.
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Consolidated revenues through June 30, 2000 of $1,831,000 increased $6,000, or
.5%, from the same period last year. The sales increase is attributed to a year
to date increase in one product category, SRB regular. SRB regular 2000 sales
showed an increase in revenue of $86,000 to $1,286,000, while solubles decreased
$62,000 to $369,000, versus 1999. SRB fine decreased $8,000 to $52,000 and a
decrease in fiber of $7,000 to $112,000 compared to sales through June 30, 1999.
Gross margins through June 30, 2000 were $742,000, or 41%, of $1,831,000
compared to $811,000 or 44% of $1,825,000 during the same period last year.
The decrease in both margin dollars and percentage was the result of no
production of solubles at the Company's Montana plant during the first six
months of this year which resulted in unabsorbed costs of $184,000 through
June 30, 2000. Gross margins on the Company's various products vary widely
and the gross margins are impacted from period to period by sales mix and
utilization of production capacity. The Company expects that gross margins
will improve as sales volumes increase.
9
<PAGE>
Research and development ("R&D") expenses reflect substantial decreases for
period ended June 30, 2000 compared to the same period last year. R&D
expenditures decreased from $349,000 for the period ended June 30, 1999 to
$175,000 for the current period. The reduction of R&D expenses is mostly due
to the termination and subsequent transfer of technical employees and
associated expenses to a nutraceutical company that was granted an exclusive
license to sell RiceX products.
S, G & A expenses were $556,000 for the period ended June 30, 2000, compared to
$636,000 for the period ended June 30, 1999, a decrease of $80,000. The decrease
was primarily attributed to decreases in payroll and payroll related expenses.
Stock option compensation expense is a non-cash charge relating to the
issuance of favorably priced stock options to employees and directors to
attract and retain key personnel to the Company. The charge represents the
difference between the exercise price and the trading value on the date of
the grant. The difference is recognized over the vesting period of each
grant, which generally ranges from two to three years, except for the
directors' grants, which vested immediately.
Professional fees increased to $575,000 for the period ended June 30, 2000 from
$188,000 for the prior year's period. The increase of $387,000, is due primarily
to the retention and subsequent release of an investor relations company,
expenditures for legal and accounting fees in connection with equity financing,
and the preparation of Forms 10-KSB and first quarter 10-QSB.
Interest expense for the period ended June 30, 2000 was $512,000 compared to
$651,000 for the same period last year. In both periods ended June 30, 2000 and
1999, these charges primarily represent the amortization of certain debt
issuance costs and accrued interest. The $139,000 decrease for the period ended
June 30, 2000 compared to the period ended June 30, 1999 is associated with the
reduction of amortized and accrued interest costs on debt that was paid off in
November 1999.
For the six months ended June 30, 2000, the Company's net loss was $1,054,000 or
$.03 per share, compared to a net loss of $1,008,000 or $.05 per share, an
increased loss of $46,000 over the same period last year. The increase in losses
for the year is primarily due to the accelerated investor relations and other
professional expenses during the six months ending June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has been substantially dependent on private placement
of its equity securities and debt financing to fund its cash requirements due to
the preliminary nature of its operation. However, during the six months ended
June 30, 2000 the cash balance and cash flow improved over the same time period
last year. The cash balance at June 30, 2000 increased $749,000 to $1,148,000
from $399,000 at June 30, 1999.
During the six months ended June 30, 2000 the Company showed a $1,038,000
improvement in cash generated from operations and financing activities compared
with the same time period last year. The cash flows from these activities
generated more than $214,000 at June 30, 2000 compared with a deficit of
$824,000 for six months ended June 30, 1999. Cash flows from operating
activities were $30,000 and negative $627,000 for six months ended June 30,
2000 and 1999 respectively. Cash flows from financing activities were $184,000
and negative $197,000 at six months ended June 30, 2000 and 1999 respectively.
In June 2000, the Company reached an agreement with a venture capital firm to
convert a $2,500,000 note for 3,571,429 shares of the Company's common stock.
In connection with this conversion, the Company agreed to issue a warrant to
purchase 3,571,429 shares of the Company's common stock at $.70 per share,
exercisable for five years. The Company is finalizing a definitive agreement
with this venture capital firm which could invest an additional $2,500,000 of
equity financing.
10
<PAGE>
During the first quarter of 2000, the Company entered into an agreement with a
company for the granting of an exclusive license to sell RiceX products in the
nutraceutical market. As part of this transaction, Patricia McPeak resigned as
President of the Company and became an officer and shareholder of that new
company. In exchange for the exclusive license in the nutraceutical market, the
Company will receive license fees and has become a shareholder in that new
company. Also, in connection with this transaction, the Company's technical
employees agreed to terminate their employment agreements with the Company and
enter into employment agreements with the new company. The Company has agreed to
issue the former employees warrants to purchase 153,000 shares of common stock
at $.79 per share in exchange for canceling their employee options and waiving
any claims under their employment agreements. As of the reference date, the
Company has not issued the warrants to these former employees but recognizes the
obligation to do so.
The Company is taking steps to address the $1,850,000 debt that matures in
December 2000. The Company expects to use cash generated from operations or
equity funding to retire this debt obligation. There can be no assurance that
such arrangements will be successful.
For 2000, the Company expects to incur additional costs for research,
professional, and legal fees for patent and trademark applications. The Company
also expects to expand its sales and marketing efforts. These efforts could
significantly increase demand for the Company's products beyond the Company's
current production capacity. While the Company believes it can increase its
production capacity to meet sales demand, significant additional capital could
be required to meet such expansion requirements.
The Company is taking steps to raise equity capital. However, there can be no
assurance that any new capital will be available to the Company or that adequate
funds for the Company's operations, whether from the Company's revenues,
financial markets, collaborative or other arrangements with corporate partners,
or from other sources, will be available when needed or on terms satisfactory to
the Company.
The failure of the Company to obtain adequate additional financing may require
the Company to delay, curtail or scale back some or all of its research and
development programs, sales and marketing efforts, manufacturing operations,
clinical studies and regulatory activities and, potentially, to cease its
operations. Any additional equity financing may involve substantial dilution to
the Company's shareholders.
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
During the first six months of 2000, the Company issued and sold 168,000 shares
of its common stock to private placement investors for $114,400, net of
financing fees, which were $9,600. Also in connection with the transaction, the
investors received warrants to purchase up to 168,000 shares of the Company's
common stock. The warrants are exercisable at $1.00 per share during the first
year from the date of issuance, $1.25 per share during the second year from the
date of issuance and at an exercise price of $1.50 per share during the third
year from the date of issuance. The warrants expire three years from the date of
issuance. The shares were issued without registration under the Securities Act
in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
During April 2000, the Company issued 14,134 shares of common stock to an agent
for introducing investors to the Company. The value of the common stock was
approximately $10,601 and is recorded in shareholders' equity. The shares were
issued without registration under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
In May 2000, the Company issued 100,000 shares of common stock to acquire
equipment from one of its suppliers. The value of the common stock was $68,750
and is recorded in shareholders equity. The shares
11
<PAGE>
were issued without registration under the Securities Act in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
During June 2000, the Company issued 32,000 shares of common stock for services.
The value of the common stock was $24,000 and is recorded in shareholders'
equity. The shares were issued without registration under the Securities Act in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
In June 2000, the Company reached an agreement with a venture capital firm to
convert a $2,500,000 note for 3,571,429 shares of the Company's common stock.
In connection with this conversion, the Company agreed to issue a warrant to
purchase 3,571,429 shares of the Company's common stock at $.70 per share,
exercisable for five years. The Company is finalizing a definitive agreement
with this venture capital firm which could invest an additional $2,500,000 of
equity financing.
During June 2000, the Company and three executive officers rescinded the
exercise of 2,700,000 stock options priced at $.72 per share and promissory
notes in the total amount of $1,944,000 given as payment for the exercise price.
On account of the rescission, the executive officers returned to the Company the
shares of common stock purchased pursuant to the exercise of the options. The
rescission of the exercise of the options restores the Company and the executive
officers to the positions they occupied prior to the exercise. The 2,700,000
stock options may be exercised in the future at the $.72 per share exercise
price until expired.
In the second quarter of 2000, the Company's Board of Directors ratified the
issuance of stock options to employees during 1999, provided the options were
priced at no less than $.69 per share. During 1999, the Company had issued to
employees non-statutory stock options to purchase Company common stock at $.55
per share subject to Board approval. Since the Board of Directors neither
approved nor ratified the issuance of these options, the options have been
cancelled. The underlying shares remain reserved for issuance under the Stock
Option Plan at another date.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual Meeting of Stockholders of the Company was held on June 30, 2000. At
the time of the meeting, proxies representing 27,798,078 votes were cast
approving the election of Joseph R. Bellantoni and Milton A. Koffman as
directors of the Company.
The directors whose terms of office as directors continued after the meeting are
Daniel L. McPeak, Patricia McPeak, Kirit S. Kamdar and Steven W. Saunders.
The final tabulation of votes cast for, against, or withheld, as well as the
number of abstention and broker non-votes for each nominee for the office as a
director were as follows:
<TABLE>
<CAPTION>
VOTES
------------------------------- BROKER
FOR AGAINST WITHHELD ABSTENTIONS NON-VOTES
--- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Joseph R. Bellantoni 27,798,078 - 82,980 - -
Milton A. Koffman 27,798,078 - 82,980 - -
</TABLE>
12
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
INDEX TO EXHIBITS
<TABLE>
<S> <C>
2.1 Certificate of Incorporation of the Company. (1)
2.2 Form of Bylaws of the Company. (2)
3.1 Certificate of Incorporation of the Company. (1)
3.2 Form of Incorporation of the Company. (1)
4.1 Option Agreement between the Company and David B. Lockton dated August 1, 1996. (1)
4.2 Restricted Stock Purchase Agreement between the Company and Allen J. Simon dated April 18, 1997 and
amended on May 29, 1997. (1)(3)
4.3 Amendment No. 1 to Restricted Stock Purchase Agreement between the Company and Allen J. Simon dated May
29, 1997. (1)(3)
4.4 Security Agreement between Allen J. Simon and the Company dated May 29, 1997. (1)(3)
4.5 Promissory Note Secured by Pledge of Stock for Allen J. Simon in favor of the Company in the amount of
$1,333,333.34 dated May 29, 1997. (1)(3)
4.6 Security Agreement between Allen J. Simon and the Company dated May 29, 1997. (1)(3)
4.7 Promissory Note Secured by Pledge of Stock for Allen J. Simon in favor of the Company in the amount of
$1,333,333.33 dated May 29, 1997. (1)(3)
4.8 Security Agreement between Allen J. Simon and the Company dated May 29, 1997. (1)(3)
4.9 Promissory Note Secured by Pledge of Stock for Allen J. Simon in favor of the Company in the amount of
$1,333,333.33 dated May 29, 1997. (1)(3)
4.10 Form of Rescission of Loan Agreement between the Company and Allen J. Simon dated August 27, 1998. (2)(3)
4.11 Security Agreement between Food Extrusion, Inc. and Monsanto Company dated November 1, 1996. (1)
4.12 Promissory Note of the Company in favor of Monsanto Company in the amount of $5,000,000 dated November
1, 1996. (1)
4.13 Subscription Agreement between the Company and the Dorchester Group dated January 1,
1996. (1)
4.14 Stock Option Agreement between the Company and Allen J. Simon dated April 18, 1997. (1)(3)
4.15 Amendment No. 1 to Stock Option Agreement by and among the Company and Allen J. Simon dated May 29,
1997. (1)(3)
4.16 Registration Rights Agreement by and between the Company and Allen J. Simon dated April 18, 1997. (1)(3)
13
<PAGE>
4.17 Registration Rights Agreement by and among the Company and Monsanto Company dated February 5, 1997. (1)
4.18 Form of Registration Rights Agreement between the Company and certain officers and
directors. (1)
4.19 Form of Warrant Agreement between the Company and certain investors dated February 9,
1996. (1)
4.20 Letter Agreement between the Company and certain investors dated January 15, 1999. (5)
4.21 Stock Purchase Agreement between the Company and Marilyn Roosevelt dated July 16, 1997. (1)
4.22 Shareholders Agreement between CF Corporation (formerly Centennial Foods, Inc.) and the Company dated
March 19, 1997. (1)
4.23 Amendment No. 1 to the Shareholders Agreement between CF Corporation and the Company dated January 15,
1999. (5)
4.24 Registration Rights Agreement between the Company and CF Corporation dated January 22, 1999. (5)
4.25 1997 Stock Option Plan with (i) Form of Incentive Stock Option Agreement and (ii) Form of Nonstatutory
Stock Option Agreement. (1)(3)
4.26 Form of Directors Stock Option Agreement. (1)(3)
4.27 Directors Stock Option Agreement between the Company and Allen J. Simon dated July 9,
1997. (1)(3)
4.28 Form of Nonstatutory Stock Option Agreement not issued under the 1997 Stock Option Plan, governing
options granted to employees by the Company. (1)(3)
4.29 Note Agreement between Monsanto Company and the Company dated October 31, 1996. (1)
4.30 Addendum No. 1 to Note Agreement dated October 31, 1996 between Monsanto Company and the Company dated
February 6, 1997. (1)
4.31 Creditor Agreement between Centennial Foods, Inc., the Company and Ike Lynch dated October 4, 1996. (1)
4.32 Creditor Agreement between Centennial Foods, Inc., the Company and Montana Department of Environmental
Quality dated October 18, 1996. (1)
4.33 Assignment of Commercial Security Agreement and Business Loan and Credit Agreement dated March 4, 1996 between
Seattle-First National Bank and Company 19 General Partnership. (1)
4.34 Assignment of Subordination Agreements and Negotiable Collateral between Seattle-First National Bank and
Company 19 General Partnership dated March 4, 1996. (1)
4.35 Creditor Agreement between Centennial Foods, Inc. and Company 19 General partnership dated October 14,
1996. (1)
4.36 Form of Subordination Agreement between certain creditors of Centennial Foods, Inc. in favor of
Seafirst. (1)
14
<PAGE>
4.37 Creditor's Agreement between Centennial Foods and Montana Department of
Commerce dated October 11, 1996. (1)
4.38 Form of Creditor's Agreement between Centennial Foods, Inc. and certain convertible note holders. (1)
4.39 Amended and Restated Loan Agreement between the Company and FoodCeuticals dated as of December 31, 1998. (5)
4.40 Promissory Note in the amount of $1,850,000 payable to FoodCeuticals dated December 31,
1998. (5)
4.41 Registration Rights Agreement between the Company and FoodCeuticals dated December 31, 1998. (5)
4.42 Warrant Agreement number 98-1 between the Company and FoodCeuticals dated December 31, 1998. (5)
4.43 Warrant Agreement number 99-1 between the Company and FoodCeuticals dated January 15, 1999. (5)
4.44 Security Agreement between the Company and FoodCeuticals dated December 31, 1998. (5)
4.45 Form of Warrant Agreement between the Company and certain former officers of the Company dated as of
December 1998. (5)
4.46 Subscription Agreement between the Company and Heldomo, A.G. dated September 10,
1998. (5)
4.47 Warrant Agreement between the Company and Heldomo, A.G. dated September 10, 1998. (5)
4.48 Stockholder Agreement by and among The RiceX Company, Inc. and BioCeutics, Inc. dated November 1, 1999.
(6)
4.49 Warrant Agreement between the Company and Dorchester Group dated April 26, 1999. (6)
4.50 Form of nonstatutory Stock Option Agreement between the Company and employee dated October 1, 1999. (3)
4.51 Warrant Agreement between the Company and JDK & Associates dated November 1, 1999. (6)
4.52 Addendum No. 2 to the October 31, 1996 Monsanto Security Agreement dated November 30, 1999. (6)
4.53 Form of nonstatutory Stock Option Agreement between the Company and Vice President, Operations, Ike
Lynch dated November 1, 1999. (3)
4.54 Form of Subscription Agreement to the Private Placement Offering 1999. (6)
4.55 Form of Warrant Agreement to the Private Placement Offering 1999. (6)
4.56 Memorandum of Understanding dated June 29, 2000 between the Company
and Intermark Partners, LLC to Convert to equity the note for
$2,500,000.
10.1 Employment Agreement between Allen J. Simon and the Company dated April 18, 1997. (1)(3)
15
<PAGE>
10.2 Amendment to Employment Agreement between Allen J. Simon and the Company dated May 29, 1997. (1)(3)
10.3 Employment Agreement between the Company and Karen D. Berriman dated September 15, 1997. (1)(3)
10.4 Employment Agreement between the Company and Gary A. Miller dated October 6, 1997. (1)(3)
10.5 Employment Agreement between the Company and Cherukuri Venkata Reddy Sastry dated April 14, 1996. (1)(3)
10.6 Employment Agreement between the Company and Rukmini Cheruvanky dated April 14, 1996. (1)(3)
10.7 Employment Agreement between the Company and Dennis Riddle dated September 19, 1997. (1)(3)
10.8 Employment Agreement between the Company and Daniel McPeak dated April 1, 1997. (1)(3)
10.9 Employment Agreement between the Company and Patricia Mayhew dated April 1, 1997. (1)(3)
10.10 Employment Agreement between the Food Extrusion Montana, Inc. and Ike E. Lynch dated March 19, 1997. (1)(3)
10.11 Consulting Agreement between the Company and Robert H. Hesse dated September 30, 1997. (1)(3)
10.12 Form of Indemnification Agreement by and among the Company and certain officers and directors. (1)(3)
10.13 Agreement between the Company and Wolcott Farms, Inc. dated March 1, 1997. (1)
10.14 Stabilized Rice Bran Processing, Sales and Marketing Agreement between Farmers' Rice Cooperative and the Company
dated June 28, 1994. (1)
10.15 Amendment dated April 16, 1996 to Stabilized Rice Bran Processing, Sales and Marketing Agreement between
Farmers' Rice Cooperative and the Company dated June 28, 1994. (1)
10.16 Stabilized Rice Bran Processing, Sales and Marketing Agreement between California Pacific Rice Milling,
Ltd. and the Company dated August 1995. (1)
10.17 Agreement between the Company and Dry Creek Trading, Inc. dated February 1, 1997. (1)
10.18 International Distribution Agreement between the Company and SunJoy Cereal-Tech Development Ltd. dated
June 16, 1997. (1)
10.19 Agreement between the Company and SunJoy Enterprises Corporation dated June 16, 1997. (1)
10.20 Non-binding Letter of Intent between Nutrilite Division of Amway Corporation and the Company dated April
8, 1998. (1)
10.21 Letter Agreement between DuCoa, L.P. and the Company dated February 25, 1998. (1)
10.22 Letter of Intent between Monsanto Company and Company dated March 16, 1998. (1)
16
<PAGE>
10.23 First Amendment to Letter Agreement between Monsanto Company and Company dated July 27, 1998. (2)
10.24 Security Agreement between CF Corporation, Food Extrusion Montana, Inc. and the Company dated March 19,
1997. (1)
10.25 Joint Development Agreement between Kellogg Company and the Company dated May 15, 1998. (1)
10.26 Promissory Note in favor of Dominion Resources, Inc. in the amount of $1,750,000 dated July 30, 1996. (1)
10.27 Commercial Lease and Deposit Receipt between Roebbelen Land Company and the Company dated December 23,
1991. (1)
10.28 First Amendment of Lease between Roebbelen Land Company and the Company dated January 19, 1994. (1)
10.29 Second Amendment of Lease between Roebbelen Land Company and the Company dated July 11, 1996. (1)
10.30 Third Amendment of Lease Agreement between Roebbelen Land Company and the Company dated February 1,
1998. (1)
10.31 Lease Agreement between Roebbelen Land Company and the Company dated July 11, 1996. (1)
10.32 First Amendment of Lease between Roebbelen Land Company and the Company dated September 1996. (1)
10.33 Second Amendment of Lease Agreement between Roebbelen Land Company and the Company dated February 1,
1998. (1)
10.34 Rental Agreement, Month to Month, between James W. Cameron, Jr. and the Company dated December 22, 1997.
(1)
10.35 Plan and Agreement of Reorganization between Core Iris, Inc. and the Company dated December 5, 1996. (1)
10.36 Asset Purchase Agreement between Centennial Foods, Inc., Food Extrusion Montana, Inc. and the Company
dated January 2, 1997. (1)
10.37 Form of Severance Agreement and Mutual Release of Claims dated as of December 1998 between the Company
and certain former officers of the Company. (5)
10.38 BioCeutics License Agreement dated November 1, 1999. (3)
10.39 Form Employment Agreement between the Company and Daniel L. McPeak Jr. date May 1, 1999. (3)
10.40 Intermark Partners, LLC Addendum to Letter of Intent to Invest, Agreement in Principal dated November
16, 1999. (6)
10.41 Intermark Partners, LLC Supplemental Agreement dated March 10, 2000. (6)
10.42 Consulting Agreement between The RiceX Company, Inc. and JDK & Associates, Inc. dated October 20, 1999. (3)
17
<PAGE>
10.43 Termination of Consulting Agreement between The RiceX Company, Inc. and JDK & Associates, Inc. dated
February 17, 2000. (6)
10.44 Stabilized Rice Bran Processing, Sales, and Marketing Agreement between Farmers' Rice Cooperative and
the Company dated May 1, 1999. (3)
10.45 Stabilized Rice Bran Processing, Sales, and Marketing Agreement between California Pacific Rice
Milling, Inc. and the Company effectively dated January 1, 2000. (7)
10.46 Licensing Agreement between NutraStar, Inc. and the Company. (7)
10.47 Sublease Agreement between the Company and NutraStar, Inc. effective November 1, 1999.
10.48 Settlement and General Release among three executive officers and The RiceX
Company effective June 30, 2000.
27 Financial Data Schedule
</TABLE>
------------------------
(1) Previously filed as an exhibit to the Company's Registration Statement
No.000-24285 filed with the Commission on May 18, 1998 and incorporated
herein by reference.
(2) Previously filed as an exhibit to the Company's Amendment No. 2 to the
Registration Statement No. 000-24285 filed with the Commission on
August 26, 1998 and incorporated herein by reference.
(3) Represents a management contract or compensatory plan or arrangement.
(4) Previously filed as item (4) on Form 8-K dated August 26, 1999,
September 22, 1999, or January 7, 2000 and incorporated herein by
reference.
(5) Previously filed as an exhibit to the Company's Form 10-KSB filed with
the Commission on April 15, 1999 and incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Form 10-KSB filed with
the Commission on March 30, 2000 and incorporated herein by reference.
(7) Previously filed as an exhibit to the Company's Form 10-QSB filed with
the Commission on May 12, 2000 and incorporated herein by reference.
18
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this to be signed on its behalf by the undersigned, thereto duly authorized.
THE RICEX COMPANY
Date: August 18, 2000 By: /s/ Daniel L. McPeak
--------------------
Daniel L. McPeak
Chairman of the Board and
Chief Executive Officer
Date: August 18, 2000 By: /s/ Todd C. Crow
----------------
Todd C. Crow
Vice President of Finance and
Chief Financial Officer
19
