Phoenix, Oct. 20 - Nutracea, a world leader in stabilized rice bran (SRB), nutrient research and technology announced today it has executed a proposal letter to obtain a $10 million credit facility through Wells Fargo Bank. The initial rate of interest varies from prime plus 2.5% to prime plus 3%, and the facility is expected to be in place by late November, subject to the satisfaction of various conditions, including the completion of the necessary loan documentation.
The Company also announced that it has entered into definitive agreements with two institutional investors for the purchase of $5 million of newly issued Series D Convertible Preferred Stock ("Preferred Stock") and five-year warrants to purchase up to 4,545,455 shares of NutraCea Common Stock. The securities are being offered in "units" at a price of $1,000 per unit. Each unit consists of one share of Preferred Stock convertible into 1,818.18 shares of Common Stock at a conversion price per share of Common Stock of $0.55, and a warrant to purchase 909.09 shares of NutraCea Common Stock at an exercise price of $0.55 per share. The investors will receive additional warrants that grant the investors the right, for a period of 60 days after the initial issuance, to purchase an additional $5 million of Preferred Stock and associated warrants on the same terms as the initial issuance.
The Preferred Shares will accrue an 8% per annum preferred dividend. These dividends are payable quarterly in arrears, commencing on January 1, 2009. Subject to the satisfaction of certain conditions, the dividends are payable in shares of NutraCea Common Stock, but may be paid in cash at NutraCea's election. NutraCea will redeem all of the Preferred Stock (unless converted) over 9 months and in 9 equal monthly installments commencing on February 1, 2009. The redemption amount is payable in shares of NutraCea Common Stock, but may be paid in cash at NutraCea's election. The conversion price and the exercise price for the Warrants are each subject to anti-dilution adjustments upon certain stock issuances at a price per share less than the conversion price. The proceeds will be used by NutraCea for the completion and further expansion of projects in the U.S. and Brazil as well as for general working capital.
This offering is made pursuant to the Form S-3 shelf registration statement that was filed by NutraCea with the Securities and Exchange Commission (the "SEC") and declared effective by the SEC on April 8, 2008. A prospectus supplement has been filed with the SEC describing in greater detail the terms of this offering. The offering is expected to close later today, subject to customary closing conditions. Rodman & Renshaw, LLC, a wholly owned subsidiary of Rodman & Renshaw Capital Group, Inc. (Nasdaq: RODM), acted as the exclusive placement agent for the offering.
Brad Edson, Chief Executive Officer and President of NutraCea stated, "Given the current economic environment and the effect it is having on companies ability to access the capital markets, we were pleased to obtain this loan facility proposal with Wells Fargo, as well as additional funds through a preferred offering. This financing will provide the working capital necessary to complete all projects that we currently have under construction.
These projects include the initial expansion of Irgovel, our Brazilian facility from its current capacity of 70,000 tons of annual production to approximately 115,000 tons of annual capacity by the end of March 2009. Included in this expansion is the installation of our unique and patented technology. A portion of the bank funds are anticipated to be used to complete the construction of the first 5,000 tons of annualized production at our Phoenix facility and the addition of 1,500 tons of capacity scheduled to come on line early next year, for a total annualized production capacity of 6,500 tons by the second quarter of 2009. This 125,000 square foot facility is intended to produce NutraCea's Stage II products of solubles and fiber and baby cereal for private label customers using our unique proprietary and patented technology and ingredients."
Mr. Edson continued, "We are moving forward with our first China based production facility. The first phase of development in China is anticipated to require less than 15% of the total capital required. The balance of the financial commitment can be done in tranches over a period of up to two years. Currently, we expect construction in China to begin during the first quarter of next year.