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NutraCea Announces Forbearance Agreement With Bank and Provides Update on Business Strategy and Transactions
Date:8/6/2009

PHOENIX, Aug. 6 /PRNewswire-FirstCall/ -- NutraCea (OTC: NTRZ), a world leader in stabilized rice bran nutrient research and technology, today announced the Company has entered into a forbearance agreement with Wells Fargo Bank, N. A. ("Wells Fargo") relating to the previously disclosed "Events of Default" which accelerated outstanding amounts due under the Credit and Security Agreement dated December 18, 2008.

Pursuant to the terms of the Forbearance Agreement dated July 31, 2009, Wells Fargo agreed to forbear from exercising its rights and remedies with respect to existing defaults and advance the Company $335,000 under its line of credit. The Forbearance Agreement expires on January 31, 2010.

NutraCea President John Short commented, "On behalf of our management team, I want to thank the professionals at Wells Fargo for the expeditious manner in which they negotiated and executed the Forbearance Agreement. We look forward to working with Wells Fargo through the forbearance period and beyond."

Under the leadership of its newly expanded executive team, NutraCea is moving quickly to refocus the Company's management and financial resources on its core businesses, which include the application of NutraCea's proprietary technologies to the production of stabilized rice bran ("SRB"), rice bran oil ("RBO"), cereal products for infants and adults and high value downstream derivatives of SRB and RBO.

Recent Transactions Consistent with Plans to Exit Non-core Investments

"In order to provide greater concentration of both management and financial resources on our core competencies, we plan to exit investments that do not directly support our primary businesses. We will reinvest funds generated by monetizing non-core assets first to stabilize NutraCea's financial position and then to further grow our core businesses," stated Short.

Two transactions in support of this strategy were recently disclosed by the Company in filings with the Securities and Exchange Commission and are more fully described below.

On June 17, 2009, NutraCea entered into a binding letter of intent ("LOI") with Ceautamed Worldwide, LLC ("Ceautamed") with respect to the acquisition by Ceautamed from NutraCea of senior secured promissory notes issued by Vital Living, Inc. ("Vital Living") in the total principal amount of $4,226,446, one million shares of Vital Living's Series A Preferred Stock, all of the rights of NutraCea in the action entitled NutraCea, Inc. v. Vital Living, Inc. in the Superior Court of Arizona, Maricopa County, and all of the rights of NutraCea under the security agreement granting a senior security interest in the assets of Vital Living.

The Vital Living transaction closed on July 29, 2009. NutraCea received the initial payment of $200,000 due under the terms of the agreement, is scheduled to receive continuing payments of $100,000 per month over the next 34 months pursuant to a promissory note, and may receive additional contingent payments following the third anniversary of the closing based upon Ceautamed's gross earnings.

Short noted, "The closing of the Vital Living transaction allows NutraCea to exit the distribution of nutraceauticals and other products unrelated to our core business and to redirect the monies received to our core business activities."

On July 23(rd), NutraCea announced the sale of its interest in PT Panganmas Inti Nusantara ("PIN"). The planned business of PIN was the construction and operation of a wheat flour mill in Indonesia including the production of stabilized wheat co-products. Short stated, "Constructing and operating wheat flour mills does not fit the strategic direction we have defined for NutraCea. At the closing of the sale of our shares in PIN, we recovered over $1.6 million that had been tied up for several months. These funds can now be redirected to our core businesses."

NutraCea remains committed to its Grain Enhancement LLC joint venture through which it intends to develop oil processing facilities in Indonesia and other markets in South East Asia.

Facilities Update - Company Rightsizing Overhead and Production Capacity

In further discussing NutraCea's strategy aimed at refocusing the Company on core competencies and exiting non-core businesses, Short noted:

"A key component in our overall business strategy is to "right size" our overhead and production capacity and to realign that capacity appropriately to the geographic markets we serve. In recent months, we have been able to meet our manufacturing needs in the production of SRB at our facilities in California and have therefore shuttered the facilities in Louisiana in order to reduce expenses while we focus on increasing sales. We are working to restart production at our Mermentau, LA facility to meet anticipated demand. We also are involved in litigation related to our Lake Charles, Louisiana facility due to late payments on certain leases and supply agreements. We are working to resolve these issues."

Currently, the Phoenix facility is not operating and all cereal and refined SRB products are being manufactured in Dillon, Montana. The Phoenix facility was completed in January, 2009 and we received a temporary operating permit from the City of Phoenix at that time. Employees were hired and trained in the last quarter of 2008 and test production runs were made in January and February, 2009, in order to train employees and test the equipment. In February, we began to reduce our workforce in the facility because of a lack of customer orders. Based on the level of demand for product and our ability to meet that demand with production from the Dillon facility, the Company elected to discontinue operations at the Phoenix facility in April.

In addition, cash flow challenges required us to prioritize our payments to suppliers and vendors, and payments to the contractor for the construction of the facility (and ultimately to some of the subcontractors) were suspended. This action resulted in the filing of several mechanics liens on the property and lawsuits against the Company. We anticipate that as a result of the Forbearance Agreement with Wells Fargo, including the additional advance of $335,000 under the line of credit, and other agreements currently being negotiated that we can resolve those payment disputes and the related litigation. We have not yet determined a plan for restarting the facility if these issues are resolved.

Short, concluded, "Management will strive to keep our shareholders, employees, partners, lenders, suppliers and other constituents informed as we work to reposition NutraCea, to explore additional opportunities to monetize assets currently invested in non-core activities and to right size overhead and production capacity in our core businesses. We believe increasing shareholder value is tied to the successful execution of business strategies directly related to our core businesses. "

About NutraCea

NutraCea is a world leader in production and utilization of stabilized rice bran. NutraCea holds many patents for stabilized rice bran production technology and proprietary neutraceutical formulas ranging from arthritis, chronic bowel conditions, and effective diabetes control to cardiovascular disease treatment protocols. NutraCea's proprietary technology enables the creation of food and nutrition products to be unlocked from rice bran, normally a waste by-product of standard rice processing. Committed to helping the underfed, they're heavily involved in providing product and technology for developing countries through NutraCea's RiceAde feeding program. More information can be found in the Company's filings with the SEC, and you can visit the NutraCea Web site http://www.NutraCea.com

Forward-Looking Statements

This release contains forward-looking statements, including statements regarding the sale and monetization of non-core assets, the development of oil processing facilities in South East Asia, the resolution of current payment disputes and litigation, the growth of our core businesses, and the anticipated demand for our products. These statements are made based upon current expectations and actual results may differ from those projected, due to various risks and uncertainties. NutraCea does not undertake to update forward-looking statements in this news release to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information. Assumptions and other information that could cause results to differ from those set forth in the forward-looking information can be found in NutraCea's filings with the Securities and Exchange Commission, including NutraCea's most recent periodic reports.


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