Company Expands Restatement of Financials to Include Additional Transactions in 2006, 2007 and 2008
PHOENIX, April 24 /PRNewswire-FirstCall/ -- NutraCea (OTC Bulletin Board: NTRZ), a world leader in stabilized rice bran (SRB) nutrient research and technology, announced that today it completed its evaluation as of December 31, 2008 of the goodwill of The Rice X Company, a wholly owned subsidiary of NutraCea. The Company concluded its goodwill was impaired and accordingly NutraCea has recorded a non-cash impairment charge of $32.33 million. This impairment charge will be reflected in the Company's financial statements for its year ended December 31, 2008. The impairment charge is a result of a combination of factors, including the decrease in the Company's stock price and the decline of cash flow and current and projected sales from the RiceX business. The Company does not expect to be required to make any future cash expenditures as a result of the impairment.
The Company also announced that following its 8-K filing on February 23, 2009, in which NutraCea disclosed that it would restate financial statements for 2007 and 2008, that it has expanded its review to include accounting treatment of additional transactions in 2006, 2007 and 2008. On April 23, 2009, it was determined by the Audit Committee that the Company would restate its financial statements for the year ended December 31, 2006, including the fourth quarter of 2006 and the first quarter of 2007.
James C. Lintzenich, Interim Chief Executive Officer of NutraCea, commented, 'Our financial team along with our Audit Committee have been working diligently to complete our accounting review. This is time intensive for those directly involved in the process. However it has no affect on our day-to-day operations. Our entire organization is working diligently towards building our Company to the benefit of all our stakeholders including customers and shareholders.'
Preliminary Findings and Determinations of Financial Review
The Company has now determined the following based upon its review of the above periods.
- NutraCea will reverse recorded revenue of $1.6 million in the fourth quarter of 2006 from the December 2006 sale of Dr. Vetz PetFlex. The reversal will reduce total revenue in 2006 by $1.6 million and increase net income for 2007 by $1.4 million.
- In the second quarter of 2007, the Company recorded a $5.0 million license fee granted to Pacific Holding Advisors Limited (PAHL).and at the same time jointly formed Grain Enhancements LLC. The Company has now concluded that the license fee did not qualify as revenue to the Company under generally accepted accounting practices and that these transactions should have been considered one arrangement instead of stand-alone transactions. This would have precluded immediate revenue recognition of the license fee. Accordingly, the transaction will be reversed which will decrease the license fee revenue in 2007 by $5.0 million and increase the Company's net loss by $5.0 million in 2007.
- In March and June 2008 Medan LLC, a wholly owned subsidiary of NutraCea, purchased capital stock totaling $8.175 million and $2.5 million, respectively of PT Panganmas Int Nusantara (PIN) from Fortune Overseas Ltd (FFOL). The Company recorded the value of these shares on its balance sheet at $10.675 million. The Company has now determined there was not sufficient evidence to support this valuation and has reduced the value of the PIN shares to $5.675 million.
- In March 2008, PAHL paid NutraCea $5.0 million of the license fee described above. A principal shareholder of FFOL is also a principal shareholder of PAHL, and the Company's receipt of payment for the license fee was made at the same time the Company decided to purchase $8.175 million of PIN shares. Based on the related ownership of FFOL and PAHL and other considerations, the Company now believes the payment of the license fee should be viewed as a combined event with related parties and will account for the $8.175 purchase of the PIN shares as a payment of $3.175 million instead of $8.175 million.
Olga Hernandez-Longan, Chief Financial Officer, stated, 'We and our Audit Committee are continuing to review and assess the findings of our expanded review but believe that we are close to finalizing. We are also assessing the effect of the restatement on the Company's internal control over financial reporting and our disclosure controls and procedures. We hope to have this process completed within a very short period in order to report our 2008 financial results as quickly as possible.
The following table contains a preliminary estimate of the impact that the above referenced restatements (including the restatements referenced in the Original Filing) will have on certain items of the Company's consolidated statements of operations for the years ended December 31, 2007 and 2006 and the first three quarters of 2008. The financial information below is subject to change based upon the completion of the audit and review of the Company's restated financial statements by its independent registered public accounting firm, and the cumulative effect of the adjustments could change in such restated financial statements.
12/31/06 12/31/07
Total revenue as reported 18,090,000 22,161,000
Decrease/Increase in total revenue (1,551,000) 1,551,000
- $1.6 million sale
Decrease in total revenue (2,601,000)
- $2.6 million sale
Decrease in license revenue (5,000,000)
- Grain Enhancements
Decrease in total revenue - ITV (1,920,000)
Increase in total revenue - ITV
Total revenue as restated 16,539,000 14,191,000
Cost of goods sold as reported 9,130,000 9,898,000
Decrease/Increase in cost of goods sold (268,000) 268,000
- $1.6 million sale
Decrease in cost of goods sold (557,000)
- $2.6 million sale
Increase in cost of goods sold 557,000
- $2.6 million sale inventory write-off
Decrease in cost of goods sold - ITV (1,283,000)
Increase in cost of goods sold - ITV
Cost of goods sold as restated 8,862,000 8,883,000
Gross profit as reported 8,960,000 12,263,000
Gross profit as restated 7,677,000 5,308,000
Operating expenses as reported 7,913,000 27,393,000
Decrease in bad debt expense (1,601,000)
- $2.6 million sale
Operating expenses as restated 7,913,000 25,792,000
Other Income (expense) as reported/restated 538,000 3,239,000
Net income (loss) before income tax as reported 1,585,000 (11,911,000)
Net income (loss) before income tax as restated 302,000 (17,245,000)
Three Three Three
months months months
ended ended ended
03/31/08 06/30/08 09/30/08
Total revenue as reported 5,111,000 10,314,000 11,201,000
Decrease/Increase in total
revenue
- $1.6 million sale
Decrease in total revenue
- $2.6 million sale
Decrease in license revenue
- Grain Enhancements
Decrease in total revenue - ITV
Increase in total revenue - ITV 699,000 702,000 414,000
Total revenue as restated 5,810,000 11,016,000 11,615,000
Cost of goods sold as reported 4,794,000 7,277,000 8,704,000
Decrease/Increase in cost of
goods sold
- $1.6 million sale
Decrease in cost of goods sold
- $2.6 million sale
Increase in cost of goods sold
- $2.6 million sale inventory
write-off
Decrease in cost of goods sold -
ITV
Increase in cost of goods sold -
ITV 467,000 470,000 277,000
Cost of goods sold as restated 5,261,000 7,747,000 8,981,000
Gross profit as reported 317,000 3,037,000 2,497,000
Gross profit as restated 549,000 3,269,000 2,634,000
Operating expenses as reported 7,400,000 7,734,000 7,053,000
Decrease in bad debt expense
- $2.6 million sale
Operating expenses as restated 7,400,000 7,734,000 7,053,000
Other Income (expense) as
reported/restated 368,000 (1,184,000) 245,000
Net income (loss) before income tax
as reported (6,715,000) (5,881,000) (4,311,000)
Net income (loss) before income tax
as restated (6,483,000) (5,649,000) (4,174,000)
In mid-January NutraCea received a letter from the Securities and Exchange Commission indicating that it had opened an informal inquiry. The Company has been advised that the status of the inquiry has been changed to a formal investigation. NutraCea has been providing information to an fully cooperating with the Commission
For more complete information, interested parties are referred to the Company's report on Form 8-k filed with the SEC last night.
About NutraCea
NutraCea is a world leader in production and utilization of stabilized rice bran. NutraCea holds many patents for stabilized rice bran production technology and proprietary neutraceutical formulas ranging from arthritis, chronic bowel conditions, and effective diabetes control to cardiovascular disease treatment protocols. NutraCea's proprietary technology enables the creation of food and nutrition products to be unlocked from rice bran, normally a waste by-product of standard rice processing. Committed to helping the underfed, they're heavily involved in providing product and technology for developing countries through NutraCea's RiceAde feeding program. More information can be found in the Company's filings with the SEC, and you can visit the NutraCea Web site http://www.NutraCea.com.
This release includes 'forward looking statements' that involve uncertainties and risks. There can be no assurance that actual results will not differ from the Company's expectations or any results expressed or implied by such forward looking statements. Factors which could cause materially different results include, among others, the risk that the final conclusion of the Audit Committee's investigation could result in a determination that the effect of the issues under review are materially greater or lesser than the Company currently believes to be the case; the risk that the Subsequent Review could take longer than expected because of unanticipated issues; the risk that these matters could adversely affect the Company's ability to make timely filings with the Commission; additional issues that may arise in connection with the Audit Committee's ongoing investigation or the audit by the Company's independent public accounting firm; risks of damage to the Company's business and reputation arising from these matters; risks arising from the Commission's formal investigation, the outstanding litigation or other possible litigation or regulatory action; and other risks and uncertainties discussed more fully in the Company's SEC filings, including those discussed under Item 1A, 'Risk Factors,' in the Company's annual report on Form 10-K for the year ended December 31, 2007, and in subsequent quarterly reports on Form 10-Q. The Company disclaims any obligation to update or correct any forward-looking statements made herein due to the occurrence of events after the issuance of this report, except as required under federal securities laws.
SOURCE NutraCea
