**FORM 10-QSB**

 

**U.S. SECURITIES AND EXCHANGECOMMISSION**

 

**Washington, D.C.  20549**

 

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**QUARTERLY REPORT UNDER SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended**

**September 30, 2002**

 

**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 theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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    ý     No    o      

 

Numberof shares of common stock outstanding as of November 7, 2002:

38,829,350

 

TRANSITIONALSMALL BUSINESS DISCLOSURE FORMAT (Check One):

 

Yes    o     No    ý     

 

 

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**THERICEX COMPANY**

**FORM10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 2002**

 

**INDEX**

 
| Part I.        | Financial Information                                           |
|----------------|-----------------------------------------------------------------|
|           |                                                            |
| Item 1.        | Unaudited Financial  Statements                                 |
|           |                                                            |
|           | a)                                                              | Unaudited Consolidated  Balance Sheet at September 30, 2002 |
|           | b)                                                              | Unaudited  Consolidated Statements of Operations for the quarter and nine month periods ended September 30, 2002 and 2001 |
|           | c)                                                              | Unaudited  Consolidated Statements of Cash Flow for the quarter and nine month periods ended September 30, 2002 and 2001 |
|           | d)                                                              | Notes  to unaudited financial statements |
|           |                                                            |
| Item  2.       | Management’s  Discussion and Analysis or Plan of Operation |
|           |                                                            |
| Item 3.        | Controls and Procedures                                         |
|           |                                                            |
| Part II.       | Other Information                                               |
|           |                                                            |
| Item 1.        | Legal Proceedings                                               |
|           |                                                            |
| Item 2.        | Changes In Securities                                           |
|           |                                                            |
| Item 3.        | Defaults Upon  Senior Securities                                |
|           |                                                            |
| Item  4.       | Submission  of Matters to a Vote of Security Holders            |
|           |                                                            |
| Item 5.        | Other Information                                               |
|           |                                                            |
| Item 6.        | Exhibits and  Reports on Form 8-K.                              |
|           |                                                            |
|           | a)                                                              | Exhibits |
|           |                                                            |   |
|           | b)                                                              | Reports on Form 8-K |
|           |
| Signatures     |
|           |
| Certifications |
|                |                                                                 |  |  |

 

2

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PART I.   FINANCIALINFORMATION

 

Item 1.   UNAUDITED FINANCIAL STATEMENTS

 

**THERICEX COMPANYCONSOLIDATED BALANCE SHEETSeptember 30, 2002**

(unaudited)

 
| ASSETS                                                                                                              |   |        |      |
|---------------------------------------------------------------------------------------------------------------------|--------|-------------|-----------|
|                                                                                                                |   |        |      |
| CURRENT ASSETS:                                                                                                     |   |        |      |
| Cash and cash  equivalents                                                                                          |   | $           | 2,170,176 |   |
| Trade accounts  receivable, net                                                                                     |   | 287,444     |      |
| Inventories                                                                                                         |   | 428,028     |      |
| Deposits and  other current assets                                                                                  |   | 130,675     |      |
|                                                                                                                |   |        |      |
| Total current  assets                                                                                               |   | 3,016,323   |      |
|                                                                                                                |   |        |      |
| PROPERTY AND  EQUIPMENT, net                                                                                        |   | 1,276,960   |      |
|                                                                                                                |   |        |      |
| OTHER ASSETS                                                                                                        |   | 91,986      |      |
|                                                                                                                |   | $           | 4,385,269 |   |
|                                                                                                                |   |        |      |
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)                                                                 |   |        |      |
|                                                                                                                |   |        |      |
| CURRENT  LIABILITIES:                                                                                               |   |        |      |
| Accounts payable and  accrued liabilities                                                                           |   | $           | 307,623   |   |
|                                                                                                                |   |        |      |
| Total current  liabilities                                                                                          |   | 307,623     |      |
|                                                                                                                |   |        |      |
| Total liabilities                                                                                                   |   | 307,623     |      |
|                                                                                                                |   |        |      |
| 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,  38,829,350 shares issued and outstanding |   | 38,829      |      |
| Additional  paid-in capital                                                                                         |   | 29,296,027  |      |
| Accumulated  deficit                                                                                                |   | (25,257,210 | )         |
|                                                                                                                |   |        |      |
| Total  shareholders’ equity                                                                                    |   | 4,077,646   |      |
|                                                                                                                |   | $           | 4,385,269 |   |

 

The accompanying notesare an integral part of these unaudited consolidated financial statements.

 

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**THERICEX COMPANY****CONSOLIDATED STATEMENTS OFOPERATI****ONS**(unaudited)

 
|                                          |   | **Quarters  ended**    |     | **Nine months  ended** |   |
|-----------------------------------------------|--------|------------------------|----------|------------------------|--------|
|                                          |   | **September  30,2002** |     | **September  30,2001** |   | **September  30,2002** |   | **September  30,2001** |   |
|                                          |   |                   |     |                   |   |   |   |   |   |
| Revenues                                      |   |                   |     |                   |   |   |   |   |   |
| Sales                                         |   | $                      | 839,755  |                   | $      | 1,767,404 |   | $ | 3,474,694 |   | $ | 4,610,641 |   |
| Royalties                                     |   | —                 |     | 6,131                  |   | 2,255 |   | 18,755 |   |
|                                          |   | 839,755                |     | 1,773,535              |   | 3,476,949 |   | 4,629,396 |   |
|                                          |   |                   |     |                   |   |   |   |   |   |
| Cost of sales                                 |   | 375,698                |     | 574,482                |   | 1,386,363 |   | 1,931,676 |   |
|                                          |   | 464,057                |     | 1,199,053              |   | 2,090,586 |   | 2,697,720 |   |
|                                          |   |                   |     |                   |   |   |   |   |   |
| Research and development expenses             |   | 68,808                 |     | 48,352                 |   | 187,262 |   | 150,031 |   |
| Selling, general and administrative expenses  |   | 439,303                |     | 456,352                |   | 1,325,895 |   | 1,274,021 |   |
| Professional fees                             |   | 143,061                |     | 245,199                |   | 376,914 |   | 538,907 |   |
| Investor relations                            |   | 37,669                 |     | 55,894                 |   | 78,105 |   | 126,396 |   |
| Income (loss) from operations                 |   | (224,784               | )        | 393,256                |   | 122,410 |   | 608,365 |   |
|                                          |   |                   |     |                   |   |   |   |   |   |
| Other income (expense):                       |   |                   |     |                   |   |   |   |   |   |
| Interest and other income                     |   | 8,217                  |     | 17,783                 |   | 22,975 |   | 60,719 |   |
| Interest and other expense                    |   | —                 |     | (189                   | )      | — |   | (6,437 | ) |
| Income (loss) before income taxes             |   | (216,567               | )        | 410,850                |   | 145,385 |   | 662,647 |   |
|                                          |   |                   |     |                   |   |   |   |   |   |
| Provision for income taxes                    |   | (48,000                | )        | (120                   | )      | (49,600 | ) | (800 | ) |
|                                          |   |                   |     |                   |   |   |   |   |   |
| Net income (loss)                             |   | $                      | (264,567 | )                      | $      | 410,730 |   | $ | 95,785 |   | $ | 661,847 |   |
|                                          |   |                   |     |                   |   |   |   |   |   |
| Basic and diluted earnings per share:         |   |                   |     |                   |   |   |   |   |   |
| Net income (loss) per share                   |   | $                      | (0.01    | )                      | $      | 0.01 |   | $ | 0.00 |   | $ | 0.02 |   |
| Weighted average number of shares outstanding |   | 38,829,350             |     | 38,829,350             |   | 38,829,350 |   | 38,829,350 |   |

 

Theaccompanying notes are an integral part of these unaudited consolidatedfinancial statements.

 

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**THERICEX COMPANY**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

(unaudited)

 
|                                                                              |   | **Quarters  ended** |      | **Nine  months ended** |   |
|-----------------------------------------------------------------------------------|--------|---------------------|-----------|------------------------|--------|
|                                                                              |   | **Sept 30,  2002**  |      | **Sept 30,  2001**     |   | **Sept 30,  2002** |   | **Sept 30,  2001** |   |
|                                                                              |   |                |      |                   |   |   |   |   |   |
| Cash flow from operating activities:                                              |   |                |      |                   |   |   |   |   |   |
| Net income (loss)                                                                 |   | $                   | (264,567  | )                      | $      | 410,730 |   | $ | 95,785 |   | $ | 661,847 |   |
| Adjustments to reconcile net income (loss) to net cash from operating  activities |   |                |      |                   |   |   |   |   |   |
| Depreciation and amortization                                                     |   | 175,937             |      | 203,800                |   | 527,756 |   | 612,888 |   |
| Shares, warrants and options issued for compensation and services                 |   | 22,143              |      | 38,455                 |   | 66,420 |   | 82,732 |   |
| Deferred revenue received                                                         |   | —              |      | 620,400                |   | — |   | 827,200 |   |
| Deferred revenue recognized                                                       |   | —              |      | (620,400               | )      | (206,800 | ) | (1,961,200 | ) |
| Amortization of prepaid processing fees                                           |   | (5                  | )         | 19,531                 |   | 39,061 |   | 58,595 |   |
| Net changes in operating assets and liabilities                                   |   |                |      |                   |   |   |   |   |   |
| Trade accounts receivable                                                         |   | 455,317             |      | 42,976                 |   | 495,930 |   | (77,012 | ) |
| Inventories                                                                       |   | (136,903            | )         | (95,355                | )      | (187,635 | ) | 110,666 |   |
| Deposits and other current assets                                                 |   | 33,606              |      | (46,203                | )      | (37,849 | ) | (81,056 | ) |
| Accounts payable and accrued liabilities                                          |   | (7,692              | )         | (42,405                | )      | (207,116 | ) | (152,530 | ) |
| Net cash from operating activities                                                |   | 277,836             |      | 531,529                |   | 585,552 |   | 82,130 |   |
| Cash flows from investing activities                                              |   |                |      |                   |   |   |   |   |   |
| (Purchases) sales of property and equipment, net                                  |   | (7,804              | )         | (101,975               | )      | (18,441 | ) | (92,150 | ) |
| Net cash from investing activities                                                |   | (7,804              | )         | (101,975               | )      | (18,441 | ) | (92,150 | ) |
|                                                                              |   |                |      |                   |   |   |   |   |   |
| Cash flows from financing activities                                              |   |                |      |                   |   |   |   |   |   |
| Proceeds from issuance of common stock                                            |   | —              |      | —                 |   | — |   | — |   |
| Proceeds, issuance of common stk, exercise of options                             |   | —              |      | —                 |   | — |   | — |   |
| Issuance of common stock on equipment purchase                                    |   | —              |      | —                 |   | — |   | — |   |
| Private Placement financing expenses                                              |   | —              |      | —                 |   | — |   | — |   |
| Net cash from financing activities                                                |   | —              |      | —                 |   | — |   | — |   |
| Net (decrease) increase in cash and cash equivalents                              |   | 270,032             |      | 429,554                |   | 567,111 |   | (10,020 | ) |
| Cash and cash equivalents, beginning of period                                    |   | 1,900,144           |      | 528,168                |   | 1,603,065 |   | 967,742 |   |
| Cash and cash equivalents, end of period                                          |   | $                   | 2,170,176 |                   | $      | 957,722 |   | $ | 2,170,176 |   | $ | 957,722 |   |

 

The accompanying notesare an integral part of these unaudited consolidated financial statements.

 

5

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**THERICEX COMPANY**

**NOTES TOUNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

 

1.   DESCRIPTION OF BUSINESS ANDSIGNIFICANT ACCOUNTING POLICIES

 

The RiceX Company (“RiceX”), formerly Food Extrusion, Inc., wasincorporated in California in 1989 and in 1998 was reincorporated in Delawareand changed its name to The RiceX Company. RiceX has a wholly owned subsidiary,Food Extrusion Montana, Inc. (FoodEx Montana). The unaudited consolidated financialstatements include the accounts of RiceX and FoodEx Montana (collectively “theCompany”), after the elimination of all inter-company balances andtransactions.

 

The Company is an agribusiness food technology company, which hasdeveloped a proprietary process to stabilize rice bran. RiceX is headquarteredin El Dorado Hills, California and has stabilization equipment located at onerice mill in Northern California.  TheCompany purchases raw rice bran from this mill.  Mill employees, under Company supervision, operate the Company’sequipment to stabilize rice bran. The Company pays a processing fee to the millfor this service. Under an agreement with the mill, the mill may use theCompany’s equipment to stabilize rice bran for its customers in exchange forthe payment of a royalty fee to the Company upon certain production conditions.

 

FoodEx Montana is engaged in the business of custom manufacturinggrain-based products for food ingredient companies at its production facilityin Dillon, Montana. The facility has specialized processing equipment andtechniques for the treatment of grain products to cook, enzyme treat, convert,isolate, dry and package finished food ingredients. The soluble and fibercomplex form of the Company’s rice bran products are produced at the Montanafacility.

 

There have been no changes in the Company’s significant accountingpolicies as set forth in the Company’s audited financial statements for theyear ended December 31, 2001, which were included in the Company’s Form 10-KSB.These unaudited financial statements for the nine months ended September 30,2002 have been prepared in accordance with generally accepted accountingprinciples for interim financial information. Accordingly, they do not includeall of the information and footnotes required by generally accepted accountingprinciples for complete financial statements. In the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary fora fair presentation have been included. The results of operations for the ninemonths ended September 30, 2002 are not necessarily indicative of the resultsexpected for the full year.

 

2.       PROPERTY AND EQUIPMENT

 

At September 30, 2002, property and equipment consists of thefollowing:

 
| Land and  buildings                             |   | $          | 377,510   |   |
|-------------------------------------------------|--------|------------|-----------|--------|
| Equipment                                       |   | 4,453,067  |      |
| Leasehold  improvements                         |   | 381,642    |      |
| Furniture and  fixtures                         |   | 208,071    |      |
|                                            |   | 5,420,290  |      |
| Less accumulated  depreciation and amortization |   | (4,345,230 | )         |
|                                            |   | 1,075,060  |      |
| Equipment not  placed in service                |   | 201,900    |      |
|                                            |   | $          | 1,276,960 |   |

 

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3.   ACCOUNTS PAYABLE AND ACCRUEDLIABILITIES

 

At September 30, 2002, accounts payable and accrued liabilities consistof the following:

 
| Trade accounts  payable    |   | $       | 107,519 |   |
|----------------------------|--------|---------|---------|--------|
| Other accrued  liabilities |   | 200,104 |    |
|                       |   | $       | 307,623 |   |

 

4.          PROVISION FOR INCOMETAXES

 

While the Company has netincome through September 30, 2002 and anticipates net income for year endedDecember 31, 2002, the Company expects to utilize net operating loss (“NOL”)carry-forwards for federal income tax only. The estimated state tax provisionpayment of $48,000 was the result of a Gubernatorial suspension of applicableNOL by the California Franchise Tax Board until 2004. California’s 2002-03budget included a suspension of the NOL for the 2002 and 2003 taxable years. Inreturn for the suspension, business taxpayers get a 100% (instead of 65%) NOL deductionfor taxable years beginning on or after January 1, 2004; and the Legislatureextended by one year the carryover period for losses incurred on or afterJanuary 1, 2002, and by two years for losses incurred prior to January 1, 2002.These tax provisions do not include the effect of Alternative Minimum Tax. Netoperating loss carry-forwards expire for federal tax purposes at various datesfrom 2009 through 2020 and expire for state tax purposes in 2003 through 2012.

 

5.   NET INCOME (LOSS) PER SHARE

 

Basic net income (loss) per share is computed by dividing net income(loss) by the weighted average number of common shares outstanding during allperiods presented.  Options and warrantsare excluded from the basic net income (loss) per share calculation becausethey are currently anti-dilutive.

 

6.   CONCENTRATION OF CREDIT RISK

 

Financial instruments that potentially subject the Company tosignificant concentrations of credit risk consist primarily of trade accountsreceivable for sales to major customers. The Company performs credit evaluations on its customers financialcondition and generally does not require collateral on accountsreceivable.  The Company maintains anallowance for doubtful accounts on its receivables based upon expectedcollectibility of all accounts receivable. Uncollected accounts have not been significant.

 

For nine months ended September 30, 2002, two customers accounted for34% and 27% of sales, respectively. Accounts receivable includes amounts duefrom these two customers comprising 36% and zero%, respectively, of the totaloutstanding.

 

Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS ORPLAN OF OPERATION

 

The following is a discussion of the unaudited consolidated financialcondition of The RiceX Company and the results of operations for the quartersended September 30, 2002 and 2001.

 

When used in this report, the words “believe,” “expect,” “anticipate”and similar expressions, together with other discussion of future trends orresults, are intended to identify forward-looking statements within the meaningof 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 differmaterially from those projected. These forward-looking statements speak only asof the date hereof. All of these forward-looking statements are based onestimates and assumptions made by management of the Company which, althoughbelieved to be reasonable, are inherently uncertain and difficult to predict;therefore, undue reliance should not be placed upon such statements. Actualresults may differ materially and adversely from such statements due to knownand unknown factors. The following important factors, among others, could causethe 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 adefault under any material debt agreements; (iii) deterioration in national orregional economic conditions; (iv) adverse state or federal legislation orregulation that increases the costs of

 

7

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compliance, or adverse findings by a regulator with respect to existingoperations; (v) loss of customers or sales weakness; (vi) inability to achieveprojected future sales levels or other operating results; (vii) theunavailability of funds for capital expenditures; (viii) operationalinefficiencies in distribution or other Company systems; (ix) interruptionand/or inability to obtain adequate supplies of raw rice bran and other raw materials;(x) unexpected increases in fuel or other transportation and energy-relatedcosts; and (xi) costs and uncertainties associated with known or potentiallegal actions. Many of such factors are beyond the control of the Company.There can be no assurance that the Company will not incur new or additionalunforeseen costs in connection with the ongoing conduct of its business.Accordingly, any forward-looking statements included herein do not purport tobe predictions of future events or circumstances and may not be realized. Inaddition, assumptions relating to budgeting, marketing, advertising, litigationand other management decisions are subjective in many respects and thussusceptible to interpretations and periodic revisions based on actual experienceand business developments, the impact of which may cause the Company to alterits marketing, capital expenditure or other budgets, which may in turn affectthe Company’s financial positions and results of operations. We undertake noobligation to revise or update publicly any forward-looking statement for anyreason.

 

QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001

 

Consolidated revenues for quarter ended September 30, 2002 were$840,000 versus $1,774,000 on a comparative basis to quarter ended September 30,2001, a decrease of $934,000, or 53%. Domestic markets experienced a $314,000decrease in revenues while the Company’s international markets, primarilyCentral America, decreased $620,000.

 

The Company is in the process of broadening its presence in the internationalmarkets. Building on last years successful proof-of-concept program inGuatemala, the Company continues to develop and expand its international marketdevelopment activities in Central America. The Company has received advisoriesfrom its Central America manufacturer’s representative, PRODESA, thatcommitments are pending from additional Central American countries for the saleof stabilized rice bran solubles. These commitments are direct purchase salescontracts financed in part through the United States government’s Public Law416 and 480 programs, with joint participation by the host country government.The contracts therefore require authorizations by the authorizedrepresentatives of each country. Because of domestic and global uncertaintiesin government programs, the Company has experienced delays in finalizingpurchase orders and delivery schedules for stabilized rice bran solubles intothis region. However, management believes that product sales and shipments willoccur during the fourth quarter of 2002.

 

Gross margins for quarter ended September 30, 2002 were $464,000, or55%, compared to $1,199,000, or 68%, during the same period last year. Grossmargin percentage was decreased as a result of product sales mix and lowproduction. Gross margin dollars were down for quarter ended September 30, 2002compared to the same period last year primarily due to lower sales volume intwo product lines. Gross margins on the Company’s various products vary widelyand the gross margins are impacted from period to period by sales mix andutilization of production capacity. The Company expects that gross margins willimprove as sales volumes increase.

 

Research and development (“R&D”) expenditures increased $20,000, or42%, from $48,000 for quarter ended September 30, 2001 to $68,000 for thecurrent quarter. Increased R&D expenses for quarter ended September 30,2002 compared to quarter ended September 30, 2001 were as a result of theCompany receiving process research reimbursements from a customer during 2001.

 

Selling, General, and Administration (“S,G&A”) expenses were$439,000 for quarter ended September 30, 2002, compared to $456,000 for quarterended September 30, 2001, a decrease of $17,000, or 4%. The decrease was causedmostly from the timing of expenses relating to expanding the sales andmarketing functions of the Company.

 

Professional fees, which include accounting, legal, and consultingfees, decreased $102,000, or 42%, from $245,000 to $143,000, for quarter endedSeptember 30, 2002 compared to the same quarter last year. These fees werecomparably less due to decreased consulting and legal activity through thequarter ended September 30, 2002.

 

Investor relations fees decreased from $56,000 during this period lastyear to $38,000 for quarter ended September 30, 2002. The decrease of $18,000,or 32%, was primarily associated with the elimination of services from aninvestor relations firm in 2001. Investor relations fees this period includeexpenses related to distribution of our annual report, SEC reportingrequirements, and expenses associated with a public relations firm.

 

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Interest expense for quarter ended September 30, 2002 was virtuallyzero, identical to the same period last year. The Company has been out of debtsince December of 1999 and has not incurred any significant interest expenses.

 

For quarter ended September 30, 2002, the Company’s net loss was$265,000, or $.01 per share, compared to net income of $411,000 or $.01 pershare, a decrease of $676,000 over the same period last year. The decrease forthe quarter is primarily due to decreased sales domestically as well as reducedsales internationally compared to this period last year.

 

While the Company has netincome through September 30, 2002 and anticipates net income for year endedDecember 31, 2002, the Company expects to utilize net operating loss (“NOL”)carry-forwards for federal income tax only. The estimated state tax provisionpayment of $48,000 was the result of a Gubernatorial suspension of applicableNOL by the California Franchise Tax Board until 2004. California’s 2002-03budget included a suspension of the NOL for the 2002 and 2003 taxable years. Inreturn for the suspension, business taxpayers get a 100% (instead of 65%) NOLdeduction for taxable years beginning on or after January 1, 2004; and theLegislature extended by one year the carryover period for losses incurred on orafter January 1, 2002, and by two years for losses incurred prior to January 1,2002. These tax provisions do not include the effect of Alternative MinimumTax. Net operating loss carry-forwards expire for federal tax purposes atvarious dates from 2009 through 2020 and expire for state tax purposes in 2003through 2012.

 

NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

 

Consolidated revenues for nine months ended September 30, 2002 were$3,477,000, a decrease of $1,152,000, or 25% on a comparative basis to ninemonths ended September 30, 2001. The Company experienced an increase of$518,000, or 19%, in sales from its domestic markets, while sales from theCompany’s international markets, primarily Central America, decreased$1,654,000 during nine months ended September 30, 2002 compared to the sametime period last year.

 

The Company is in the process of broadening its presence in theinternational markets. Building on last years successful proof-of-conceptprogram in Guatemala, the Company continues to develop and expand itsinternational market development activities in Central America. The Company hasreceived advisories from its Central America manufacturer’s representative,PRODESA, that commitments are pending from additional Central Americancountries for the sale of stabilized rice bran solubles. These commitments aredirect purchase sales contracts financed in part through the United Statesgovernment’s Public Law 416 and 480 programs, with joint participation by thehost country government. The contracts therefore require authorizations byauthorized representatives of each country. Because of domestic and globaluncertainties in government programs, the Company has experienced delays infinalizing purchase orders and delivery schedules for stabilized rice bransolubles into this region. However, management believes that product sales andshipments will occur during the fourth quarter of 2002.

 

Gross margins for nine months ended September 30, 2002 were $2,091,000,or 60%, compared to $2,698,000 or 58%, during the same period last year. Theincrease in percentage was the result of plant efficiencies, favorable productsales mix, and lower raw material costs. Gross margins on the Company’s variousproducts vary widely and the gross margins are impacted from period to periodby sales mix and utilization of production capacity. The Company expects thatgross margins will improve as sales volumes increase.

 

R&D expenses increased $37,000 for nine months ended September 30,2002 compared to the same period last year. R&D expenditures increased from$150,000 for nine months ended September 30, 2001 to $187,000 for nine monthsended September 30, 2002. The change in R&D expenses is mostly due to theabsence of reimbursement from a customer for R&D expenditures in processresearch which occurred in the same period last year.

 

S,G&A expenses were $1,326,000 for nine months ended September 30,2002, compared to $1,275,000 for nine months ended September 30, 2001, anincrease of $51,000. The increase was due mostly to expenses relating toexpanding the sales and marketing functions of the Company.  The increase had been anticipated bymanagement based upon their 2002 business development plan.

 

Professional fees decreased $162,000 to $377,000 for nine months endedSeptember 30, 2002 from $539,000 for the prior year’s period. The decrease isprimarily due to lower legal and consulting fees compared to nine months endedSeptember 30, 2001.

 

Investor relations fees decreased from $126,000 for nine months endedSeptember 30, 2001 to $78,000 for nine months ended September 30, 2002. Thedecrease of $48,000 was primarily associated with expenses related to aninvestor relations firm in

 

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2001. Investor relations fees this period include expenses related toprinting and distribution of our annual report, SEC reporting requirements andexpenses related to a public relations firm.

 

Interest expense for period ended September 30, 2002 was virtuallyzero, compared to $6,000 in the same period last year. These expenses arefinance charges related to director and officer insurance financing. TheCompany has been out of debt since December of 1999 and has not incurred anysignificant interest expenses.

 

The Company had net income of $96,000 for nine months ended September30, 2002, or $.00 per share, compared to net income of $662,000 or $.02 pershare, a decrease of $566,000 over the same period last year. The decrease isprimarily due to decreased revenues of $1,152,000, off-set by decreased cost ofgoods sold of $545,000, lowered utilization of production capacity, and reducedsales to Central America through nine months ended September 30, 2002.

 

While the Company has netincome through September 30, 2002 and anticipates net income for year endedDecember 31, 2002, the Company expects to utilize net operating loss (“NOL”)carry-forwards for federal income tax only. The estimated state tax provisionpayment of $48,000 was the result of a Gubernatorial suspension of applicableNOL by the California Franchise Tax Board until 2004. California’s 2002-03budget included a suspension of the NOL for the 2002 and 2003 taxable years. Inreturn for the suspension, business taxpayers get a 100% (instead of 65%) NOLdeduction for taxable years beginning on or after January 1, 2004; and theLegislature extended by one year the carryover period for losses incurred on orafter January 1, 2002, and by two years for losses incurred prior to January 1,2002. These tax provisions do not include the effect of Alternative MinimumTax. Net operating loss carry-forwards expire for federal tax purposes atvarious dates from 2009 through 2020 and expire for state tax purposes in 2003through 2012.

 

LIQUIDITY AND CAPITAL RESOURCES

 

For nine months ended September 30, 2002, cash balance and cash flowincreased compared to the same time period last year. The Company’s cashbalance at September 30, 2002 increased $1,212,000 to $2,170,000, up from$958,000 at September 30, 2001. Since the Company does not have debt toservice, management believes its cash reserve is adequate to meet futureoperating requirements.

 

During the nine months ended September 30, 2002 the Company showed a$503,000 improvement in net cash generated from operations compared to ninemonths ended September 30, 2001. The cash flow from this activity generatedmore than $586,000 for nine months ended September 30, 2002 compared to $82,000for nine months ended September 30, 2001. The Company’s cash position has notrequired cash from financing activities in order to fund operations in the twoyears since retiring all its debt.

 

The Company is broadening its presence in the international markets.Building on last year’s successful proof-of-concept program in Guatemala (asdiscussed below), the RiceX Company continues to develop and expand itsinternational market development activities in Central America. The Company hasreceived advisories from its Central America manufacturer’s representative,PRODESA, that commitments are pending from additional Central Americancountries for the sale of stabilized rice bran Solubles. These commitments aredirect purchase sales contracts financed in part through the United Statesgovernment’s Public Law 416 and 480 programs, with joint participation by thehost country government. This, therefore, requires authorizations by eachcountry’s authorized representatives. Because of domestic and globaluncertainties in government programs, the Company has experienced delays infinalizing purchase orders and delivery schedules for stabilized rice branSolubles into this region. However, management believes that product sales andshipments will occur during the fourth quarter of 2002.

 

The Company’s first international strategic alliance was established inDecember, 2000 with PRODESA and the Christian Children’s Fund in Guatemala forsupplying nutritionally dense ingredients throughout Guatemala over a twelvemonth period starting in January 2001. As a result, the Company’s stabilized rice bran product Solubles havebeen used as a base for nutritionally enhanced drink for school breakfast andlunch programs to over 67,000 children at the rural community level throughoutGuatemala. The Company is on the cutting edge of this developing nation’sprogram as evidenced by the Company’s 2001 proof-of-concept market developmentactivities in Guatemala that generated nearly $2,300,000 in revenues for theyear ended December 31, 2001.

 

The twelve-month program in Guatemala was highly successful in reducingmalnutrition in school age children and enhancing their nutritional growthpotential. The Company expects to expand into two to three additional CentralAmerican countries in

 

10

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2003 using the Guatemalan Nutrition Drink model. The Company is holdingsubstantive discussions with several government officials which may result inexpanding its Central American program into additional countries including Asiaduring 2003.

 

The Company continues to focus its market development activities onnutritionally dense ingredients in the international market place first inLatin America and then in Asian countries. These market segments currentlyrepresent multi million dollar potential market opportunities. The Company alsocontinues to initiate strategic alliance discussions to identify and formulatepotential joint venture opportunities with major domestic premium pet food andequine feed manufacturers and distributors. Domestic markets for these segmentscurrently represent a potential opportunity of over $250 million annually. TheCompany hopes the results of these successful alliances will have a significantfinancial effect on the Company’s annual revenues and profit starting withinfiscal years 2002 and 2003. There can be no assurance the Company will obtainadditional strategic alliances.

 

The Company also hopes to partner with local governments and companiesin developing nations on a joint venture basis to stabilize locally grown ricebran for local consumption and for future export. The Company plans tointroduce its stabilization process systems in large rice mills located inCentral and South America, China, India and Southeast Asia. The Company has hadpreliminary discussions regarding the demonstration of its system and the endproducts for this technology with a number of companies and governmentsincluding other countries in Central America, India, China, Argentina, Brazil,Malaysia and certain African countries. There can be no assurance that these discussions will lead toimplementation of the RiceX Process with these companies or governments.

 

These efforts couldsignificantly increase demand for the Company’s products beyond the Company’scurrent production capacity. While the Company believes it can increase itsproduction capacity to meet sales demand, significant additional capital couldbe required to meet such expansion requirements. The Company has sufficientcash reserves to meet all anticipated short term operating requirements, thetiming and amount of any long term capital requirements cannot be predicted atthis time. There can be no assurance that any financing will be available onacceptable terms.  If such financing isnot available on satisfactory terms, the Company may be unable to develop orexpand its business, develop new products, or develop new markets at the ratedesired and its operating results may be adversely affected.

 

Item 3.    CONTROLS ANDPROCEDURES

 

(a) Evaluation ofDisclosure Controls and Procedures: An evaluation of the Company’s disclosurecontrols and procedures (as defined in Sections 13(a)-14(c) and 15(d)-14(c) ofthe Securities Exchange Act of 1934 (the “Act”)) was carried out under thesupervision and with the participation of the Company’s Chief ExecutiveOfficer, Chief Financial Officer and several other members of the Company’ssenior management within the 90-day period preceding the filing date of thisquarterly report. The Company’s Chief Executive Officer and Chief FinancialOfficer concluded that the Company’s disclosure controls and procedures ascurrently in effect are effective in ensuring that the information required tobe disclosed by the Company in the reports it files or submits under the Actare (i) accumulated and communicated to the Company’s management (including theChief Executive Officer and Chief Financial Officer) in a timely manner, and(ii) recorded, processed, summarized and reported with the time periodsspecified in the SEC’s rules.

 

(b) Changes in InternalControls: In the quarter ended September 30, 2002, the Company did not make anysignificant changes in, nor take any corrective actions regarding, its internalcontrols or other factors that could significantly affect these controlssubsequent to the date of the evaluation referred to in the previous paragraph,including any corrective action with regard to significant deficiencies andmaterial weaknesses.

 

PART II.   OTHER INFORMATION

 

Item 1.    LEGALPROCEEDINGS

 

The Company is from time to time involved in litigation arising in theordinary course of its business. While the outcome of litigation and otherproceedings against the Company cannot be predicted with certainty, in theopinion of management, none of the litigation in which the Company is currentlyinvolved, individually or in the aggregate, is expected to result in a materialadverse effect on the Company’s financial position or results of operations.

 

 

11

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Item 2.    CHANGESIN SECURITIES

 

None

 

Item 3.    DEFAULTSUPON SENIOR SECURITIES

 

None

 

Item 4.    SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None

 

Item 5.    OTHER INFORMATION

 

None

 

Item 6.    EXIBITSAND REPORTS ON FORM 8-K

 

(a)           INDEX TO EXHIBIT

 
| **Exhibit********No**. |   | **Description of Exhibit**                                                                                                                                                                                                                                                                                                                   |
|------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                         |
| 2.1                    |   | Certificate of Incorporation of the Company.(1)                                                                                                                                                                                                                                                                                              |
| 2.2                    |   | Form of Incorporation of the Company.(1)                                                                                                                                                                                                                                                                                                     |
| 3.1                    |   | Certificate of Incorporation of the Company.(1)                                                                                                                                                                                                                                                                                              |
| 3.2                    |   | Form of Corporate By-laws.(2)                                                                                                                                                                                                                                                                                                                |
| 4.1                    |   | Form of Registration Rights Agreement between the  Company and certain officers and directors.(1)                                                                                                                                                                                                                                            |
| 4.2                    |   | Form of Directors Stock Option Agreement.(1)(3)                                                                                                                                                                                                                                                                                              |
| 4.3                    |   | Form of Non-statutory Stock Option Agreement not  issued under the 1997 Stock Option Plan, governing options granted to employees by the  Company.(1)(3)                                                                                                                                                                                     |
| 4.4                    |   | Promissory Note in the amount of $1,850,000 payable  to FoodCeuticals dated December 31, 1998.(5)                                                                                                                                                                                                                                            |
| 4.5                    |   | Registration Rights Agreement between the Company  and FoodCeuticals dated December 31, 1998.(5)                                                                                                                                                                                                                                             |
| 4.6                    |   | Warrant Agreement number 98-1 between the Company  and FoodCeuticals dated December 31, 1998.(5)                                                                                                                                                                                                                                             |
| 4.7                    |   | Warrant Agreement number 99-1 between the Company  and FoodCeuticals dated January 15, 1999.(5)                                                                                                                                                                                                                                              |
| 4.8                    |   | Security Agreement between the Company and  FoodCeuticals dated December 31, 1998.(5)                                                                                                                                                                                                                                                        |
| 4.9                    |   | Warrant Agreement between the Company and Dorchester  Group dated April 26, 1999.(6)                                                                                                                                                                                                                                                         |
| 4.10                   |   | Form of non-statutory Stock Option Agreement issued  under the 1997 Stock Option Plan between the Company and employees dated  October 1, 1999.(3)(6)                                                                                                                                                                                        |
| 4.11                   |   | Warrant Agreement between the Company and JDK &  Associates dated November 1, 1999.(6)                                                                                                                                                                                                                                                   |
| 4.12                   |   | Form of non-statutory Stock Option Agreement issued  under the 1997 Stock Option Plan between the Company and Vice President,  Operations, Ike Lynch dated November 1, 1999. Identical Agreements with Vice  President and General Manager, Daniel McPeak, Jr. and Vice President of  Finance, Chief Financial Officer,  Todd C. Crow.(3)(6) |
| 4.13                   |   | Form of Subscription Agreement to the Private  Placement Offering 1999.(6)                                                                                                                                                                                                                                                                   |
| 4.14                   |   | Form of Warrant Agreement to the Private Placement  Offering 1999.(6)                                                                                                                                                                                                                                                                        |
| 4.15                   |   | Memorandum of Understanding dated June 29, 2000  between the Company and Intermark Partners, LLC to convert to equity the note  for $2,500,000.(8)                                                                                                                                                                                           |
| 4.16                   |   | Warrant agreement between the Company and GBV  Intermark Fund, LLC dated September 29, 2000.(9)                                                                                                                                                                                                                                              |
| 4.17                   |   | Warrant agreement between the Company and Gilbert L.  McCord, Sr. dated September 29, 2000.(9)                                                                                                                                                                                                                                               |
| 4.18                   |   | Definitive agreement between the Company and  Intermark Partners, LLC dated September 29, 2000.(9)                                                                                                                                                                                                                                           |
| 4.19                   |   | Form of Warrant Agreement between the Company and  certain former employees dated as of March 31, 2000.(10)                                                                                                                                                                                                                                  |
| 4.20                   |   | Non-statutory Stock Option Agreement issued under  the 1997 Stock Option Plan between the Company and Daniel L. McPeak, Sr.  dated October 27, 2000.(3)(10)                                                                                                                                                                                  |
| 4.21                   |   | Warrant agreement between the Company and Intermark  Partners Strategic Management, LLC representing the Class I Warrant dated October 2,  2000.(10)                                                                                                                                                                                         |

 

 

12

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| 4.22  |   | Warrant agreement between the Company and Intermark  Partners Strategic Management, LLC representing the Class II Warrant dated October 2, 2000.(10)                                                  |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.23  |   | Warrant agreement between the Company and Intermark  Partners Strategic Management, LLC representing the Class III Warrant dated October  2, 2000.(10)                                                |
| 4.24  |   | Form of Board Member Non-statutory Stock Option  Agreement issued under the 1997 Stock Option Plan between the Company and the  Board Members dated February 22, 2001, September 23 and 29, 2001.(12) |
| 4.25  |   | Preferred Stock Subscription Agreement between the  Company and Alliance Consumer International, subsequently named NutraStar,  Inc., dated December 10, 2001.(13)                                    |
| 4.26  |   | Alliance Consumer International, Inc. Exchange Offer  For The Common Stock Of NutraStar dated December 11, 2001. (13)                                                                                 |
| 4.27  |   | Put/Call Agreement between the Company and  NutraStar, Inc. dated January 15, 2002.(14)                                                                                                               |
| 4.28  |   | Form of Non-statutory Stock Option Agreement issued  under the 1997 Stock Option Plan between the Company and employees dated  January 2, 2000.(15)                                                   |
| 10.1  |   | Form of Indemnification Agreement by and among the  Company and certain officers and directors.(1)(3)                                                                                                 |
| 10.2  |   | Commercial Lease and Deposit Receipt between  Roebbelen Land Company and the Company dated December 23, 1991.(1)                                                                                      |
| 10.3  |   | First Amendment of Lease between Roebbelen Land  Company and the Company dated January 19, 1994.(1)                                                                                                   |
| 10.4  |   | Second Amendment of Lease between Roebbelen Land  Company and the Company dated July 11, 1996.(1)                                                                                                     |
| 10.5  |   | Third Amendment of Lease Agreement between Roebbelen  Land Company and the Company dated February 1, 1998. (1)                                                                                        |
| 10.6  |   | Lease Agreement between Roebbelen Land Company and  the Company dated July 11, 1996.(1)                                                                                                               |
| 10.7  |   | First Amendment of Lease between Roebbelen Land  Company and the Company dated September 1996.(1)                                                                                                     |
| 10.8  |   | Second Amendment of Lease Agreement between  Roebbelen Land Company and the Company dated February 1, 1998.(1)                                                                              |
| 10.9  |   | Executive Employment Agreement for Daniel L. McPeak  Jr., Executives Todd C. Crow and Ike Lynch have similar employment  agreements.(3)(6)                                                            |
| 10.10 |   | Intermark Partners, LLC Addendum to Letter of Intent  to Invest, Agreement in Principal dated November 16, 1999.(6)                                                                                   |
| 10.11 |   | Intermark Partners, LLC Supplemental Agreement dated  March 10, 2000.(7)                                                                                                                              |
| 10.12 |   | Consulting Agreement between The RiceX Company, Inc.  and JDK & Associates, Inc. dated October 20, 1999.(3)(8)                                                                                    |
| 10.13 |   | Termination of Consulting Agreement between The  RiceX Company, Inc. and JDK & Associates, Inc. dated February 2000.(3)(7)                                                                        |
| 10.14 |   | Stabilized Rice Bran Processing, Sales, and  Marketing Agreement between Farmers’ Rice Cooperative and the Company dated  July 1, 2002.*                                                         |
| 10.15 |   | Stabilized Rice Bran Processing, Sales, and  Marketing Agreement between California Pacific Rice Milling, Inc. and the  Company effectively dated January 1, 2000.(7)                                 |
| 10.16 |   | Licensing Agreement between NutraStar, Inc. and the  Company.(7)                                                                                                                                      |

 

13

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| 10.17  |   | Sublease Agreement between the Company and  NutraStar, Inc. effective November 1, 1999.(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.18  |   | Settlement and General Release among three executive  officers and The RiceXTM Company effective June 30, 2000.(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.19  |   | Employment Agreement between Daniel L. McPeak, Sr.  and the Company dated April 1, 2000.(3)(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.20  |   | Consulting Agreement executed as of February 22,  2001, by and between The RiceX Company and Dr. Glenn H. Sullivan(3)(11)                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 10.21  |   | Consulting Agreement between JDK and Associates,  Inc. and the Company executed as of March 15, 2001(12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.22  |   | Exclusive Distribution Agreement between the Company  and NutraStar, Inc., dated December 21, 2001.(13)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.23  |   | License Agreement between the Company and NutraStar  Technologies, Inc. dated January 9, 2002.(13)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.24  |   | Indemnity Agreement between the Company and  NutraStar, Inc. dated December 13, 2001.(13)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.25  |   | Contract for Services between the Company and Dr.  Glenn H. Sullivan dated January 1, 2002.(13)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 16.1   |   | Effective January 1,  2000, Grant Thornton, LLP, the independent accountants for The RiceX Company, sold its Stockton and Sacramento,  California offices to Moss Adams, LLP, an accounting and consulting firm.  Since the individuals performing services for the Company at Grant Thornton  are now in the employ of Moss  Adams, effective January 01, 2000, the Company dismissed Grant Thornton as  its independent accountants and  engaged the services of Moss Adams to act as the Company’s principal  accountants to audit the  Company’s financial statements.(4) |
| 21     |   | List of   Subsidiaries (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 99.1   |   | Certification of the Chief Executive Officer of The  RiceX Company dated August 12, 2002.(15)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 99.2   |   | Certification of the Chief Financial Officer of The  RiceX Company dated August 12, 2002.(15)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|        |
| (1)    |   | Previously filed as an exhibit to the Company’s  Registration Statement No. 000-24285 filed with the Commission on May 18,  1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (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.                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (3)    |   | Represents a management contract or compensatory  plan or arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (4)    |   | Previously filed as Item (4) on Form 8-K dated  January 7, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (5)    |   | Previously filed as an exhibit to the Company’s Form  10-KSB filed with the Commission on April 15, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (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.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (8)    |   | Previously filed as an exhibit to the Company’s Form  10-QSB filed with the Commission on August 18, 2000 and incorporated herein  by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (9)    |   | Previously filed as an exhibit to the Company’s Form  10-QSB filed with the Commission on November 14, 2000 and incorporated herein  by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (10)   |   | Previously filed as an exhibit to the Company’s Form  10-KSB filed with the Commission on April 17, 2001 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (11)   |   | Previously filed as an exhibit to the Company’s Form  10-QSB filed with the Commission on May 15, 2001 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (12)   |   | Previously filed as an exhibit to the Company’s Form  10-QSB filed with the Commission on August 10, 2001 and incorporated herein  by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (13)   |   | Previously filed as an exhibit to the Company’s Form  10-KSB filed with the Commission on March 29, 2002 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (14)   |   | Previously filed as an exhibit to the Company’s Form  10-QSB filed with the Commission on May 10, 2002 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (15)   |   | Previously filed as an exhibit to the Company’s Form  10-QSB filed with the Commission on August 12, 2002 and incorporated herein  by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

 

* Confidential treatmentgranted as to certain portions.

 

(b)                                  REPORTS ON FORM 8-K

 

None

 

14

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**SIGNATURES**

 

In accordance with the requirements of the Exchange Act, the registrantcaused this to be signed on its behalf by the undersigned, thereto dulyauthorized.

 

 
|   |              | THE RICEX COMPANY |
|--------|-------------------|-------------------|
|   |              |              |   |
| Date : | November 14, 2002 |              | By: | /s/ Daniel L. McPeak, Sr. |   |
|   |              |              | Daniel L. McPeak, Sr. |
|   |              |              | Chairman of the Board and |
|   |              |              | Chief Executive Officer |
|   |              |              |   |
| Date:  | November 14, 2002 |              | By: | /s/ Todd C. Crow |   |
|   |              |              | Todd C. Crow |
|   |              |              | Vice President of Finance and |
|   |              |              | Chief Financial Officer |
|        |                   |                   |  |  |  |  |

 

**CERTIFICATIONS**

 

I, Daniel L. McPeak Sr., certify that:

 

1.             I have reviewedthis quarterly report on Form 10-QSB of The RiceX Company;

 

2.             Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.             Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.             The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13(a)-14 and 15(d)-14) for the registrant and we have:

 

a)             designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

b)            evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

c)             presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.             The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)             all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

b)            any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.             The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 
| Date:                     | November 14, 2002 |
|---------------------------|-------------------|
|                      |
| /s/ Daniel L. McPeak, Sr. |              |
| Daniel L. McPeak, Sr.     |
| Chief Executive Officer   |
|                           |                   |  |

 

 

15

----

 

 

I, Todd C. Crow, certify that:

 

1.             I have reviewedthis quarterly report on Form 10-QSB of The RiceX Company;

 

2.             Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.             Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.             The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13(a)-14 and 15(d)-14) for the registrant and we have:

 

a)             designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

b)            evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

c)             presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.             The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)             all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

b)            any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.             The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 

 
| Date:                   | November 14, 2002 |
|-------------------------|-------------------|
|                    |
| /s/Todd C. Crow         |              |
| Todd C. Crow            |
| Chief Financial Officer |
|                         |                   |  |

 

16

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