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Royal Hawaiian Orchards, L.P. – ‘424B2’ on 4/19/17

On:  Wednesday, 4/19/17, at 11:24am ET   ·   Accession #:  1437749-17-6784   ·   File #:  333-216850

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/19/17  Royal Hawaiian Orchards, L.P.     424B2                  1:874K                                   RDG Filings/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B2       Prospectus                                          HTML    661K 

Filed pursuant to Rule 424(b)(2)
Registration No. 333-216850

PROSPECTUS

ROYAL HAWAIIAN ORCHARDS, L.P.

Depositary Units Representing up to 11,100,000 Class A Units

of Limited Partnership Interests Issuable upon the

Exercise of Subscription Rights at

$1.79 per Depositary Unit

We are distributing, at no charge, to holders of our depositary units (the “Depositary Units”) representing Class A units of limited partnership interests (“Units”), non-transferable subscription rights to purchase up to 11,100,000 Depositary Units at a price of $1.79 per Depositary Unit in this rights offering (this “Rights Offering”). You will receive one subscription right for each whole Depositary Unit held by you of record as of 5:00 p.m., Eastern Time, on February 28, 2017 (the “Record Date”). No subscription rights will be distributed for any fractional Depositary Units held on the Record Date. Each Right will entitle you to purchase one Depositary Unit. There is no minimum subscription amount required for consummation of this Rights Offering.

If you timely and fully exercise your basic subscription right with respect to all the subscription rights you hold and other rights holders do not exercise their basic subscription rights in full, then you will be entitled to exercise an over-subscription privilege, subject to availability and allocation, to purchase unsubscribed Depositary Units at the same subscription price per Depositary Unit. If over-subscription requests exceed the number of Depositary Units available, we will allocate the available Depositary Units pro rata among the rights holders exercising the over-subscription privilege in proportion to the number of basic subscription rights a holder exercised, relative to the aggregate number of basic subscription rights exercised by all holders electing to over-subscribe. Fractional Depositary Units resulting from the exercise of the over-subscription privilege as to any rights holder will be eliminated by rounding down to the nearest whole Depositary Unit. For additional details regarding the pro rata allocation process, see “Questions and Answers Relating to this Rights Offering—What is the over-subscription privilege?” If you properly exercise your over-subscription privilege for a number of Depositary Units that exceeds the number of Depositary Units allocated to you, any excess subscription payments received by the subscription agent will be returned to you as soon as practicable, without interest or deduction, following the expiration of this Rights Offering.

As of the Record Date, Fred and Mary Wilkie Ebrahimi (the “Ebrahimis”) and Barry W. Blank (collectively, the “Principal Holders”) beneficially owned approximately 67.7% and 7.8%, respectively, of the Depositary Units. Assuming that the Principal Holders exercise their basic subscription rights in full and no other holders exercise their rights in this offering, after giving effect to this offering, the Ebrahimis would own approximately 77% of our outstanding Depositary Units and the Principal Holders would collectively own 86% of our outstanding Depositary Units. See “Risk Factors—Significant influence over the Partnership’s affairs may be exercised by certain holders of Depositary Units.”

The subscription rights will expire if they are not exercised by 5:00 p.m., Eastern Time, on May 9, 2017, or such later date and time to which the Rights Offering is extended (the “Expiration Date”). Subscription rights that are not exercised by the Expiration Date will expire and will have no value. The board of directors of our managing general partner, Royal Hawaiian Resources, Inc. (the “Managing Partner”), may, in its sole discretion cancel the rights offering or extend the period for exercising the subscription rights for additional periods ending no later than May 30, 2017. If we cancel the Rights Offering, the subscription agent will return all subscription payments received without interest or deduction, as soon as practicable.

You should carefully consider whether to exercise your subscription rights prior to the expiration of this Rights Offering. All exercises of subscription rights are irrevocable and non-transferable. The board of directors of the Managing Partner is making no recommendation regarding your exercise of the subscription rights.

This offering is being made directly by us. We are not using an underwriter or selling agent.

American Stock Transfer & Trust Company, LLC, is our subscription agent for this Rights Offering.

Our Depositary Units are traded publicly on the OTCQX platform under the symbol “NNUTU.” On April 18, 2017, the last reported sale price for our Depositary Units on the OTCQX was $2.07 per Depositary Unit. The subscription rights are not transferable and will not be listed for trading on any exchange or market.

Investing in our Depositary Units involves risks. You should read the “Risk Factors” section of this prospectus beginning on page 18 before exercising your rights.

As a result of the terms of this Rights Offering, holders of Depositary Units who do not fully exercise their subscription rights will own, upon completion of this Rights Offering, a smaller proportional interest in the Partnership than otherwise would be the case had they fully exercised their subscription rights. See “Risk Factors—If you do not exercise your subscription rights, your interest in the Partnership will be diluted” for more information.

Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is April 19, 2017

TABLE OF CONTENTS

About this Prospectus

This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission (the “SEC”). This prospectus does not contain all of the information provided in the registration statement. For further information about us or the securities offered by this prospectus, you should refer to the registration statement, including the exhibits filed with the registration statement and the information incorporated by reference into the registration statement, which you can obtain from the SEC as described below under the heading “Where You Can Find More Information.”

You should only rely on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with any information different from that contained in this prospectus. We are not making an offer to sell securities in any jurisdiction in which the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, and any information incorporated by reference is accurate only as of the date of the document incorporated by reference, in each case, regardless of the time of delivery of this prospectus or any exercise of the subscription rights. Our business, financial condition, results of operations, and prospects may have changed since that date. To understand this Rights Offering fully and for a more complete description of this Rights Offering, you should read this entire document carefully, including particularly the “Risk Factors” section of this prospectus.

As used in this prospectus, the terms “Partnership,” “we,” “our” and “us” to refer to Royal Hawaiian Orchards, L.P. and its subsidiaries. We are managed by Royal Hawaiian Resources, Inc., which is our general partner. Our general partner makes all determinations on behalf of our partnership, including determinations related to the conduct of our partnership’s business and operations. As a result, the executive officers of our general partner, under the direction of the board of directors of our general partner, make all decisions on behalf of our partnership with respect to the conduct of our business and operations. We sometimes refer to the board of directors of our general partner as “our board of directors,” “our board,” the “board,” or “the Managing Partner.”

Forward-Looking Statements

Statements that are not historical facts contained in or incorporated by reference into this prospectus are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. The words “anticipate,” “goal,” “seek,” “project,” “strategy,” “future,” “likely,” “may,” “should,” “will,” “will,” “estimate,” “expect,” “plan,” “intend,” “target” and similar expressions and references to future periods, as they relate to us, are intended to identify forward-looking statements. Forward-looking statements include statements we make regarding:

Forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Our actual results could differ materially from those in such statements. Factors that could cause actual results to differ from those contemplated by such forward-looking statements include, without limitation: the factors discussed in (i) the “Risk Factors” section of this prospectus, (ii) our most recent Annual Report on Form 10-K and (iii) the other documents incorporated by reference, as well the following factors:

Forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. All forward-looking statements are expressly qualified by these cautionary statements.

Questions and Answers Related to this Rights Offering

The following are examples of what we anticipate will be common questions about this Rights Offering. The following questions and answers do not contain all of the information that may be important to you and may not address all of the questions that you may have about this Rights Offering. This prospectus and the documents incorporated by reference into this prospectus contain more detailed descriptions of the terms and conditions of this Rights Offering and provide additional information about us and our business, including potential risks related to this Rights Offering, the Depositary Units offered hereby and our business.

What is this Rights Offering?

We are distributing, at no charge, to holders of our Depositary Units, non-transferable subscription rights to purchase Depositary Units representing Class A Units of the Partnership. You will receive one subscription right for each whole Depositary Unit you own as of 5:00 p.m., Eastern Time, on February 28, 2017, the Record Date. No subscription rights will be distributed for any fractional Depositary Units held on the Record Date. Each subscription right consists of a basic subscription right and an over-subscription privilege, as described below. We will issue up to a total of 11,100,000 Depositary Units in this Rights Offering.

What is the basic subscription right?

The basic subscription right gives the holders the opportunity to purchase one Depositary Unit at a subscription price of $1.79 per Depositary Unit. You may exercise some or all of your subscription rights, or you may choose not to exercise any subscription rights at all. The subscription rights are a new issue of securities, are non-transferable, and do not and will not have a trading market.

If you hold Depositary Units in your name, the number of new Depositary Units you may purchase pursuant to your basic subscription rights is indicated on the rights certificate that will be provided to you by the subscription agent. If you hold your Depositary Units in the name of a broker, dealer, custodian bank or other nominee, you will not receive a rights certificate.

What is the over-subscription privilege?

If you timely and fully exercise your basic subscription rights with respect to all the subscription rights you hold, you may also choose to exercise your over-subscription privilege by purchasing a portion of the remaining Depositary Units that other rights holders do not purchase through their basic subscription rights. You should indicate on your rights certificate, or the form provided by your nominee if your Depositary Units are held in the name of a nominee, how many additional Depositary Units you would like to purchase pursuant to your over-subscription privilege.

We will seek to honor the over-subscription requests in full, subject to a maximum of 11,100,000 Depositary Units being offered in this Rights Offering. If over-subscription requests exceed the number of Depositary Units available, we will allocate the available Depositary Units as follows:

Fractional shares resulting from the exercise of the over-subscription privilege will be eliminated by rounding down to the nearest whole share. Our subscription agent for the Rights Offering will determine, in its sole discretion, the over-subscription allocation based on the formula described above.

Because we will not know the total number of available Depositary Units and how available Depositary Units will be allocated before this Rights Offering expires, in order for the exercise of your entire over-subscription privilege to be valid, you should deliver to the subscription agent payment in an amount equal to the aggregate subscription price of the entire number of Depositary Units that you have requested to purchase pursuant to your over-subscription privilege, along with payment for the exercise of your basic subscription rights and all rights certificates and other subscription documents, prior to the expiration of the Rights Offering, even if you ultimately are not allocated the full amount of your over-subscription request. To the extent the aggregate subscription price of the actual number of Depositary Units allocated to you pursuant to the over-subscription privilege is less than the amount you actually paid, the excess subscription payments will be returned to you as soon as practicable, without interest or penalty, following the expiration of this Rights Offering.

Will fractional Depositary Units be issued in this Rights Offering?

No. We will not issue fractional Depositary Units in the Rights Offering. We will only distribute one subscription right to each holder to acquire one whole Depositary Unit per whole Depositary Unit owned. The over-subscription privilege may only be exercised for whole Depositary Units.

Why are we conducting this Rights Offering?

We have approximately $13.2 million of short-term debt due on July 15, 2017, which we cannot repay from current operations. We are conducting the Rights Offering to raise additional capital which will allow us to pay our $2.835 million bridge loan incurred to purchase our Becker orchards that becomes due on July 15, 2017. Additionally, it will allow us to continue to invest in and grow the Partnership business in the event we are unable to renew or refinance our revolving credit facility which also matures on July 15, 2017. We have elected to fund our stated business goals by means of this offering as opposed to other methods, because the Rights Offering (i) allows all of our holders an equal opportunity to invest in our future without being diluted; (ii) may be executed relatively quickly and at a relatively modest cost without having to seek new investors or create a new marketable security; and (iii) allows us to increase our equity and decrease our reliance on debt financing. A description of the intended use of proceeds is set forth in “Use of Proceeds” below.

How was the subscription price per Depositary Unit determined?

The subscription price of the Depositary Units offered in this Rights Offering has been determined unilaterally by the board of directors of the Managing Partner. In setting the subscription price, the board of directors considered the current financial condition of the Partnership, including the significant amount of short-term debt, our history of losses over the last several years, the risk that we may not be able to maintain our operations as a going concern, the current trading price of the Depositary Units on the OTCQX, the historical market price for the Depositary Units, the low volume of trading on the OTCQX, fluctuations in the market price of the Depositary Units, and other factors relating to the Partnership and the market for its Depositary Units. The subscription price is not intended to bear any relationship to the book value of our assets or our past operations, cash flows, losses, financial condition, net worth or any other established criteria used to value securities. You should not consider the subscription price to be an indication of the fair value of the Depositary Units underlying the subscription rights.

Am I required to exercise all of the subscription rights I receive in this Rights Offering?

No. You may exercise some or all of your subscription rights, or you may choose not to exercise any subscription rights. If you do not exercise any subscription rights, the number of Depositary Units you own will not change as a result of this Rights Offering. However, if you choose not to exercise your subscription rights, your ownership interest in the Partnership will be diluted to the extent other rights holders exercise their subscription rights, and your voting and other rights in the Partnership will likewise be diluted.

How soon must I act to exercise my subscription rights?

The subscription agent must receive all required subscription documents and full subscription payment, including final clearance of any uncertified check, before this Rights Offering expires at 5:00 p.m., Eastern Time, on May 9, 2017, unless we decide to extend the Rights Offering. If you hold your Depositary Units in the name of a broker, dealer, custodian bank or other nominee, your nominee may establish an earlier deadline before the expiration of this Rights Offering, by which time you must provide it with your instructions to exercise your subscription rights.

Although we will make reasonable attempts to provide this prospectus to our holders of Depositary Units to whom subscription rights are distributed, this Rights Offering and all subscription rights will expire on the Expiration Date, whether or not we have been able to locate all such holders of Depositary Units.

Can you extend or cancel the Rights Offering?

Yes. We have the option to extend the Rights Offering and the period for exercising your subscription rights through May 30, 2017, although we do not presently intend to do so. If we elect to extend the expiration of the rights offering, we will issue a press release announcing such extension no later than 9:00 a.m., Eastern Standard Time, on the next business day after the most recently announced expiration of the Rights Offering. Our board of directors may also cancel the Rights Offering at any time prior to the Expiration Date for any reason. If the Rights Offering is cancelled, we will issue a press release notifying rights holders of the cancellation and all subscription payments received by the subscription agent will be returned, without interest or deduction, as soon as practicable.

May I transfer my subscription rights?

No. The subscription rights are non-transferable.

Are we requiring a minimum subscription to complete the Rights Offering?

No.

Has the board of directors of the Managing Partner made a recommendation regarding this Rights Offering?

No. The board of directors of the Managing Partner is making no recommendation regarding any exercise of your subscription rights. Rights holders who exercise subscription rights will incur investment risk on new money invested. We cannot predict the price at which our Depositary Units will trade. The market price for our Units may fluctuate above or below the subscription price. The trading price of our Depositary Units will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales of our equity or equity-related securities, and other factors. Volatility in the market price or low trading volume of our Depositary Units may prevent you from being able to sell your Depositary Units when you want or at prices you find attractive. You should make your decision based on your assessment of our business and financial condition, our prospects for the future, the terms of this Rights Offering and the information contained in, or incorporated by reference into, this prospectus. See “Risk Factors” for a discussion of some of the risks involved in investing in our Depositary Units.

Will the directors and executive officers of the Managing Partner participate in this Rights Offering?

To the extent they held Depositary Units as of the Record Date, the directors and executive officers of the Managing Partner are entitled (but not obligated) to participate in this Rights Offering on the same terms and conditions applicable to all rights holders. At this time, such directors and executive officers have not committed to participate in this Rights Offering. The Managing Partner does not hold Class A Units and is not entitled to subscription rights. However, it owns 1% of the Partnership as of the date of this prospectus, and upon the expiration of the Rights Offering, the Managing Partner will contribute additional capital in accordance with the requirements of the Partnership Agreement so that the aggregate general partner contributions will equal 1% of total capital contributions. See “Our Partnership Agreement—Additional Capital Contributions by General Partners.”

How do I exercise my subscription rights if I own Depositary Units in my name?

If you hold Depositary Units in your name and you wish to participate in this Rights Offering, you must deliver a properly completed and duly executed rights certificate and all other required subscription documents, together with payment of the full subscription price, to the subscription agent before 5:00 p.m., Eastern Time, on the Expiration Date. In certain cases you may be required to provide signature guarantees. If you send an uncertified check, payment will not be deemed to have been delivered to the subscription agent until the check has cleared.

Please follow the delivery instructions on the exercise of rights form located on the reverse of your rights certificate. Do not deliver documents to us. You are solely responsible for completing delivery to the subscription agent of your rights certificate, including the completed exercise of rights form, all other required subscription documents and subscription payment. You should allow sufficient time for delivery of your subscription materials to the subscription agent so that the subscription agent receives them by 5:00 p.m., Eastern Time, on the Expiration Date.

If you send a payment that is insufficient to purchase the number of Depositary Units you requested, or if the number of Depositary Units you requested is not specified in the forms or exceeds the number of Depositary Units to which you are entitled, the payment received will be applied to exercise your subscription rights to the fullest extent possible based on the amount of the payment received, subject to the availability of Depositary Units and allocation procedures under the over-subscription privilege. If your aggregate subscription payment is greater than the amount you owe for exercise of your basic subscription right in full and you have not specified an amount for the over-subscription privilege, your subscription rights will only be exercised for the basic subscription privilege. Any excess subscription payment received by the subscription agent will be returned to you, without interest or penalty, as soon as practicable following the Expiration Time.

What should I do if I want to participate in this Rights Offering but my Depositary Units are held in the name of a broker, dealer, custodian bank or other nominee?

If you hold your Depositary Units through a broker, dealer, custodian bank or other nominee, then your nominee is the record holder of the Depositary Units you own and the associated subscription rights. The record holder must exercise the subscription rights on your behalf. If you wish to purchase Depositary Units through this Rights Offering, you should contact your broker, dealer, custodian bank or nominee as soon as possible. Please follow the instructions of your nominee. Your nominee may establish an earlier deadline before the Expiration Date of this Rights Offering.

What form of payment is required to purchase our Depositary Units?

As described in the instructions accompanying the rights certificate, payments submitted to the subscription agent must be made in U.S. currency, by one of the following three methods:

Payments will be deemed to have been received upon (i) clearance of any cashier’s check or uncertified check, or (ii) receipt of collected funds in the account designated above. If paying by uncertified check, the funds may take five or more business days to clear. Accordingly holders who wish to pay the subscription price by means of uncertified check are urged to make payment sufficiently in advance of the Expiration Date to ensure that the payment is received and clears by that date.

If you hold your Depositary Units in the name of a broker, dealer, custodian bank or other nominee, separate payment instructions may apply. Please contact your nominee, if applicable, for further payment instructions.

When will I receive my new Depositary Units?

If you purchase Depositary Units in this Rights Offering, we will issue those Depositary Units to you in book-entry, or uncertificated, form as soon as practicable following the expiration of this Rights Offering. If you are a registered holder of Depositary Units, you will receive a direct registration account statement detailing the number of Depositary Units you purchased in the Rights Offering. If you are a beneficial owner of Depositary Units that are registered in the name of a broker or other nominee, you should receive confirmation of your purchase of Depositary Units in the Rights Offering from your broker or nominee. Depositary Receipts will not be issued for Depositary Units purchased in the Rights Offering.

After I exercise my subscription rights, can I change my mind and cancel my purchase?

No. All exercises of subscription rights are irrevocable, even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights. You should not exercise your subscription rights unless you are certain that you wish to purchase Depositary Units at the subscription price of $1.79 per Depositary Unit.

What effects will this Rights Offering have on our outstanding Depositary Units?

As a result of this Rights Offering, up to an additional 11,100,000 Depositary Units (each Depositary Unit evidences one Unit) may be issued and outstanding after the closing of this Rights Offering, and the ownership and voting interests of the existing holders of Depositary Units that do not fully exercise their basic subscription rights will be diluted. As of the Record Date, we had 11,100,000 Depositary Units outstanding.

In addition, if the subscription price of the Depositary Units is less than the market price of our Depositary Units, it will likely reduce the market price per Depositary Unit of the Depositary Units you already hold.

How much will the Partnership receive from this Rights Offering and how will such proceeds be used?

We estimate that the net proceeds to us from this Rights Offering (assuming the full exercise of subscription rights), after deducting estimated offering expenses, will be approximately $19,654,000. We intend to use the proceeds from this offering (1) to repay the 2015 bridge loan used to acquire the Becker orchards; (2) to purchase capital equipment; and (3) for general partnership purposes, which may include, among other things, repaying or refinancing all or a portion of the indebtedness outstanding under our revolving credit facility, funding working capital, and acquiring land, orchards and related businesses. There is no guarantee that the funds raised in this Rights Offering will be sufficient to accomplish all these goals. A more detailed description of the intended use of proceeds is set forth under the heading “Use of Proceeds.”

Are there risks in exercising my subscription rights?

Yes. The exercise of your subscription rights involves risks. Exercising your subscription rights involves the purchase of additional Depositary Units, and you should consider this investment as carefully as you would consider any other investment. Among other things, you should carefully consider the risks described under the heading “Risk Factors” and all other information included or incorporated by reference into this prospectus.

If my exercise of subscription rights is not valid, will my subscription payment be refunded to me?

Yes. The subscription agent will hold all funds it receives in a segregated bank account until completion of this Rights Offering. If your exercise of subscription rights is deemed not to be valid, all subscription payments received by the subscription agent will be returned as soon as practicable following the expiration of this Rights Offering, without interest or deduction. If you own Depositary Units through a nominee, it may take longer for you to receive your subscription payment because the subscription agent will return payments through the record holder of your Depositary Units.

What fees or charges apply if I purchase Depositary Units in this Rights Offering?

We are not charging any fee or sales commission to issue subscription rights to you or to issue Depositary Units to you if you exercise your subscription rights. If you exercise your subscription rights through a broker, dealer, custodian bank or other nominee, you are responsible for paying any fees your record holder may charge you.

What are the material U.S. federal income tax consequences of receiving and exercising my subscription rights?

Generally, the exercise of your subscription rights should not be a taxable event for U.S. federal income tax purposes. Following exercise of your subscription rights, however, you could be allocated additional taxable income of the Partnership as a result of the exercise. In addition, as a holder of Depositary Units received upon the exercise of subscription rights, you will be subject to the risks attendant to ownership of Depositary Units. Further, the issuance of the subscription rights is not anticipated to cause you to recognize income or gain, except possibly to the extent (if any) that the fair market value of the subscription rights you receive exceeds your adjusted basis in your Depositary Units. Please read “Risk Factors” for a discussion of certain tax risks related to receiving and exercising your subscription rights and the ownership of Depositary Units received upon exercising your subscription rights and “Material U.S. Federal Income Tax Consequences” for a discussion of the material U.S. federal income tax consequences of this Rights Offering. In addition, you are encouraged to consult with your own tax advisors for a full understanding of the U.S. federal, state, local and foreign tax consequences of receiving and exercising your subscription rights.

To whom should I send my forms and payment?

If your Depositary Units are held in the name of a broker, dealer, custodian bank or other nominee, then you should send your rights certificate, all other required subscription documents and subscription payment to that record holder. If you are the record holder, then you should send your rights certificate, all other required subscription documents and subscription payment by mail, hand delivery or overnight courier to:

American Stock Transfer & Trust Company, LLC

Operations Center

Attention: Reorganization Department

6201 Fifteenth Avenue

Brooklyn, New York 11219

Telephone Number for Confirmation or Information:

(800) 937-5449

You and, if applicable, your nominee are solely responsible for completing delivery to the subscription agent of your rights certificate, all other required subscription documents and subscription payment. You should allow sufficient time for delivery of your subscription materials to the subscription agent before the expiration of this Rights Offering. If you hold your Depositary Units through a broker, dealer, custodian bank or other nominee, your nominee may establish an earlier deadline before the Expiration Date of this Rights Offering.

Whom should I contact if I have other questions?

If you have any questions regarding this Rights Offering, the completion of the rights certificate or any other subscription documents or the submission of payment in this Rights Offering, please call D.F. King & Co., Inc., our information agent for the Rights Offering, at (212) 493-3910 (for brokerage firms and banks) or toll free at (866) 356-7813 (for holders of Depositary Units).

Risk Factors

An investment in our Depositary Units involves a high degree of risk. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks described below, together with the other information included or incorporated by reference in this prospectus, including the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016 and the cautionary statements and risks highlighted in other sections of this prospectus. If any of the following risks actually occurs, our business, financial condition and results of operations could be materially adversely affected. If this were to happen, the value of our Depositary Units could decline significantly, and you could lose all or part of your investment. The risks discussed below include forward-looking statements, and our actual results may differ materially from those discussed in these forward-looking statements.

Risk Factors Related to Our Business

We need to obtain financing to repay indebtedness, and our current financial circumstances raise substantial doubt about our ability to continue as a going concern.

Our cash and cash equivalents are not sufficient to repay our 2015 bridge loan when due on July 15, 2017. In addition, unless we can extend or refinance our revolving credit facility, we will not be able to repay our revolving credit facility also maturing on July 15, 2017. We are conducting the Rights Offering to obtain raise funds to satisfy our short-term debt or to enable us to extend the terms of our debt; however, there can be no assurances that we will be able to raise sufficient funds on terms that are acceptable or that we will be able to extend the terms of our debt. If we are unable to sell sufficient Depositary Units in the Rights Offering, extend the terms of our debt, or otherwise raise funds in the short-term, management has determined that substantial doubt exists about our ability to maintain our operations as a going concern. The financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue in existence. We continue to experience net operating losses.

We have a substantial amount of indebtedness. In the event we do not repay or refinance such indebtedness, we will face substantial liquidity issues and might be required to sell some of our assets to meet our debt payment obligations.

We have a substantial amount of indebtedness. As of December 31, 2016, we have a total of approximately $13.2 million of short-term indebtedness, all of which we will need to refinance or repay in the next few months. There can be no assurances we will be able to refinance our indebtedness (1) on commercially reasonable terms, (2) on terms, including with respect to interest rates, as favorable as our current debt or (3) at all. If we are unable to raise sufficient funds in the Rights Offering or refinance or renegotiate our debt, we will not be able to repay our 2015 bridge loan due July 15, 2017, and we may not be able to generate enough cash flows from operations to service our remaining debt or to extend or refinance our revolving credit facility. Although we have maintained, renegotiated and extended a revolving credit facility with our current lender and its predecessor for over 15 years, there is no assurance that we will be able to do so given our current financial condition.

We rely upon external financing which is secured by a pledge of all of our real and personal property. If we are unable to comply with the terms of our loan agreements, we could lose our assets.

We rely on external financing, currently being provided by an Amended and Restated Credit Agreement with American AgCredit, PCA (“AgCredit PCA”) and a Credit Agreement with American AgCredit, FLCA (“AgCredit FLCA”) through a revolving credit facility and several term notes. These agreements contain various terms and conditions, including financial ratios and covenants, and are secured by all of the real and personal property of the Partnership. On multiple occasions during the last several years and as recently as the end of 2016, the Partnership has failed to comply with various financial covenants under its credit agreements but has been able to obtain waivers or modifications of the agreements to avoid a default. If we are unable to meet the terms and conditions of our credit agreements or to obtain waivers or modifications of such loan agreements, we could be in default under our credit agreements, and the lenders would be able to accelerate the obligations and foreclose on the collateral securing the indebtedness. There is no assurance that we will be able to comply with our credit agreements or obtain waivers or modifications in the future to avoid a default.

We have a history of losses and our future profitability on a quarterly or annual basis is uncertain, which could have a harmful effect on our business and the value of our Depositary Units.

Since we launched our branded products in November 2012 and through the most current period, we have not generated enough revenue to exceed our expenditures within any twelve-month fiscal period. We have financed our operations primarily through our cash flow from operations, our revolving credit facility and offerings of Units. As of December 31, 2016, we had debt outstanding of $23.5 million, of which $13.2 million is short-term, including a $2.835 million bridge loan maturing on July 15, 2017. If we cannot sell sufficient Depositary Units in this Rights Offering or refinance or extend the terms of our debt, we will not be able to repay the 2015 bridge loan or our revolving credit facility, both of which mature on July 15, 2017. This could force us to sell assets or cease operations and you could lose your investment.

Our substantial level of indebtedness could adversely affect our ability to address the needs of our business and to react to changes in our business. In addition, if we fail to comply with our covenants, our debt could be accelerated.

As a result of our substantial indebtedness:

Currently we have credit agreements in place that limit in certain circumstances our ability to incur additional indebtedness, pay dividends, create liens, sell assets, or engage in certain mergers and acquisitions, among other things. In addition, our credit agreements contain financial covenants. Our ability to comply with these covenants or to satisfy our debt obligations will depend on our future operating performance. If we violate the restrictions in our credit agreements or fail to comply with our applicable financial covenants, we will be in default under the agreements, which in some cases would cause the maturity of a substantial portion of our long-term indebtedness to be accelerated.

ROYAL HAWAIIAN ORCHARDS® products were launched in November 2012 and have a limited retail distribution history, and thus far, our branded products have not been profitable. Our future ability to grow our revenues and generate profits depends upon continued sell-in and sell-through sales of these new products and increasing efficiencies, decreasing costs and/or modifying prices related to the manufacture and sale of our products.

Prior to November 2012, we had never pursued the sale of macadamia nut products to customers or the sale of nuts in kernel form to others for incorporation into their products. Any adverse developments with respect to the sale of ROYAL HAWAIIAN ORCHARDS® macadamia products could significantly reduce revenues and have a material adverse effect on our ability to achieve profitability and future growth. We cannot be certain that we will be able to continue to commercialize our macadamia products or that our products will be accepted in retail markets. Specifically, the following factors, among others, could affect continued market acceptance, revenues and profitability of ROYAL HAWAIIAN ORCHARDS® snack products:

There is no assurance that this effort will be successful or that we will receive a return on our investment.

We have historically depended on a single nut purchaser.

In 2016 and 2015, we sold approximately 19% per year of our WIS nut production to Mauna Loa. In 2016, we also sold kernel to Mauna Loa totaling $4.4 million and together with WIS, sales to Mauna Loa represented 25% of our total net revenue. Mauna Loa is a significant customer, and any disruption of the Mauna Loa relationship could significantly adversely affect us if we are not able to find alternative purchasers of our nut production at comparable prices.

We are subject to the risk that market prices of macadamia nuts may not be adequate to cover our costs of production.

We have three long-term agreements requiring Mauna Loa to purchase the nuts from orchards that we purchased from International Air Service Co., Ltd. (“IASCO”). The IASCO orchards have historically represented approximately 20% (18% in 2016) of our nut production. These contracts expire in 2029, 2078 and 2080 and provide for market-determined prices. We either use our remaining nuts in our branded products or sell them to willing buyers at market prices. We are subject to the risk that world macadamia nut prices could decline such that we may not be able to sell our nuts at prices that covers our cost of production.

A disruption at any of our production facilities would significantly decrease production, which could increase our cost of sales and reduce our net sales and income from operations.

We plan to dry our nuts at our new drying plant and process and manufacture into products at third-party processor and manufacturing facilities. A temporary or extended interruption in operations at any of these facilities, whether due to technical or labor difficulties, destruction or damage from fire, flood or earthquake, infrastructure failures such as power or water shortages, raw material shortage or any other reason, whether or not covered by insurance, could interrupt our process and manufacturing operations, disrupt communications with our customers and suppliers, and cause us to lose sales and write off inventory. Any prolonged disruption in the operations of these facilities would have a significant negative impact on our ability to manufacture and package our products on our own and may cause us to seek additional third-party arrangements, thereby increasing production costs or, in the case of our drying facility, prevent us from having sufficient nuts for our branded products business. These third parties may not be as efficient as we and our current processors and manufacturers are and may not have the capabilities to process and package some of our products, which could adversely affect sales or operating income. Further, current and potential customers might not purchase our products if they perceive our lack of alternate manufacturing facilities to be a risk to their continuing source of products.

We are dependent on third-party manufacturers to manufacture all of our products, and the loss of a manufacturer or the inability of a manufacturer to fulfill our orders could adversely affect our ability to make timely deliveries of product.

We currently rely on and may continue to rely on third-party manufacturers to produce all of our branded products. If one of these manufacturers were unable or unwilling to produce sufficient quantities of our products in a timely manner or renew contracts with us, we would have to identify and qualify new manufacturers, and we may be unable to do so. Due to industry and customer requirements that manufacturers of food products be certified and/or audited for compliance with food safety standards, the number of qualified manufacturers is constrained. As we expand our operations, we may have to seek new manufacturers and suppliers or enter into new arrangements with existing ones. However, only a limited number of manufacturers may have the ability to produce a high volume of our products, and it could take a significant period of time to locate and qualify such alternative production sources. In addition, we may encounter difficulties or be unable to negotiate pricing or other terms as favorable as those that we currently enjoy.

There can be no assurance that we would be able to identify and qualify new manufacturers in a timely manner or that such manufacturers could allocate sufficient capacity to meet our requirements, which could materially adversely affect our ability to make timely deliveries of product. In addition, there can be no assurance that the capacity of our current manufacturers will be sufficient to fulfill our orders, and any supply shortfall could materially and adversely affect our business, financial condition and results of operations. Currently, some of our products are produced by a single third-party source that maintains only one facility. The risks of interruption described above are exacerbated with respect to such single-source, single-facility manufacturer.

Our manufacturers are required to comply with quality and food production standards. The failure of our manufacturers to maintain the quality of our products could adversely affect our reputation in the marketplace and result in product recalls and product liability claims.

Our manufacturers are required to maintain the quality of our products and to comply with our product specifications and requirements for certain certifications for food safety from third-party organizations. In addition, our manufacturers are required to comply with all federal, state and local laws with respect to food safety. However, there can be no assurance that our manufacturers will continue to produce products that are consistent with our standards or in compliance with applicable laws and standards, and we cannot guarantee that we will be able to identify instances in which our manufacturers fail to comply with such standards or applicable laws. We would have the same issue with new suppliers. The failure of any manufacturer to produce products that conform to applicable standards could materially and adversely affect our reputation in the marketplace and result in product recalls, product liability claims and severe economic loss.

Any significant delays of shipments to or from our warehouses could adversely affect our sales.

Shipments to and from our warehouses could be delayed for a variety of reasons, including weather conditions, strikes, and shipping delays. Any significant delay in the shipments of product would have a material adverse effect on our business, results of operations and financial condition, and could cause our sales and earnings to fluctuate during a particular period or periods. We have from time to time experienced, and may in the future experience, delays in the production and delivery of product.

Our farming operations face a competitive labor market in Hawaii.

Our farming operations require a large number of workers, many on a seasonal basis. The labor market on the island of Hawaii is very competitive, and most of our employees are unionized under contracts that expire in May 2019. In the event that we are not able to obtain and retain both permanent and seasonal workers to conduct our farming operations, or in the event that we are not able to maintain satisfactory relationships with our unionized workers, the Partnership’s financial results could be negatively impacted.

Our operations rely on certain key personnel who are critical to our business.

Our future operating results depend substantially upon the continued service of key personnel and our ability to attract and retain qualified management and technical and support personnel. We cannot guarantee success in attracting or retaining qualified personnel. There may be only a limited number of persons with the requisite skills and relevant industry experience to serve in those positions. Our business, financial condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current position, or by our inability to attract and retain skilled employees.

Our farming operations are subject to environmental laws and regulations, and any failure to comply could result in significant fines or clean-up costs.

We use herbicides, fertilizers and pesticides, some of which may be considered hazardous or toxic substances. Various federal, state, and local environmental laws, ordinances and regulations regulate our properties and farming operations and could make us liable for costs of removing or cleaning up hazardous or toxic substances on, under, or in property that we currently own or lease, that we previously owned or leased, or upon which we currently or previously conducted farming operations. These laws could impose liabilities without regard to whether we knew of, or were responsible for, the presence of hazardous or toxic substances. The presence of hazardous or toxic substances, or the failure to properly clean up such substances when present, could jeopardize our ability to use, sell or collateralize certain real property and result in significant fines or clean-up costs, which could adversely affect our business, financial condition and results of operations. Future environmental laws could impact our farming operations or increase our cost of revenues.

Our business is subject to seasonal fluctuations.

Because we experience seasonal fluctuations in production and thus sales from our orchards, our quarterly results fluctuate, and our annual performance has depended largely on results from two quarters. Our business is highly seasonal, reflecting the general pattern of peak production and consumer demand for nut products during the months of October, November and December. Historically, a substantial portion of our revenues occurred during our third and fourth quarters, and we generally experienced lower revenues during our first and second quarters together with losses. Weather conditions may delay harvesting from December into early January, which may result in a fiscal year with lower than normal revenues. With the launch of our branded products business, WIS revenue continues to be highly seasonal, while branded products revenue is more evenly distributed throughout the year.

Our branded products require us to carry additional inventory, which increases our working capital needs and our reliance on generating additional income from sales or obtaining additional external financing.

Although branded products revenues are more evenly distributed throughout the year, this change has required us to carry larger quantities of inventory, increasing our working capital needs. If we are unable to generate additional working capital from product sales or obtain external financing, we may not be able to build the inventory necessary to maintain a sufficient and consistent supply of our branded products to meet customer demands, which could have a material adverse effect on our business, results of operations, liquidity, financial condition and brand image.

The price at which we can sell our macadamia nuts may not always exceed our cost of goods sold.

During 2016, our costs to farm and produce macadamia nuts, including depreciation of the trees, varied between 87.1 cents and 91.5 cents per WIS pound (depending on the orchard) or an average of approximately 89.6 cents per WIS pound and some WIS was sold for less than its cost. Macadamia orchards are required to be cultivated and farmed in order to maintain the trees, even in years where the price at which the macadamia nuts could be sold do not cover the cost of revenues in any specific orchard. In such event, we could suffer losses from certain orchards, and our financial performance could be adversely affected. There is no assurance that the prices of macadamia nuts in the future will exceed the costs of production.

Additional regulation could increase our costs of production, and our business could be adversely affected.

As an agricultural company, our business is labor intensive, and we are subject to extensive government regulation, including regulation of the manner in which we cultivate, fertilize and process our macadamia nuts. Furthermore, processing and selling our branded products subject us to additional regulations regarding the manufacturing, distribution, and labeling of our products. There may be changes to the legal or regulatory environment, and governmental agencies and jurisdictions where we operate may impose increased minimum wage requirements and safety requirements, as well as new manufacturing, importation, processing, packaging, storage, distribution, labeling or other restrictions, which could increase our costs and affect our financial performance.

Many of our production costs are not within our control, and we may not be able to recover cost increases in the form of price increases from our customers.

We purchase water, electricity and fuel, fertilizer, pesticides, equipment and other products to conduct our farming operations and produce macadamia nuts. Transportation costs, including fuel and labor, also represent a significant portion of the cost of our nuts. These costs could fluctuate significantly over time due to factors that may be beyond our control. Our business and financial performance could be negatively impacted if there are material increases in the costs we incur that are not offset by price increases for the products sold.

We are subject to the risk of product liability claims.

The production and sale of food products for human consumption involves the risk of injury to consumers. This risk increases as we move from primarily a farming operation into the marketing and sale of branded products. Although we believe we have implemented practices and procedures in our operations to promote high-quality and safe food products, we cannot assure you that consumption of our products will not cause a health-related illness or injury in the future or that we will not be subject to claims or lawsuits relating to such matters.

Diseases and pests can adversely affect nut production.

Macadamia trees are susceptible to various diseases and pests that can affect the health of the trees and resultant nut production. There are several types of fungal diseases that can affect flower and nut development. One of these is Phytophthora capsici, which affects the macadamia flowers and developing nuts, and another, Botrytis cinerea, causes senescence of the macadamia blossom before pollination is completed. These types of fungal disease are generally controllable with fungicides. Historically, these fungi have infested the reproductive plant parts at orchards located in Keaau during periods of persistent inclement weather. Tree losses may occur due to a problem known as Macadamia Quick Decline (“MQD”). Research at the University of Hawaii indicates that this affliction is due to Phytophthora capsici, which is associated with high moisture and poor drainage conditions. The Keaau orchards are areas with high moisture conditions and may be more susceptible to the MQD problem. Afflicted trees in these regions are replaced with cultivars that are intolerant to MQD. The Partnership’s Keaau orchards experienced tree replacement of 1.6% in 2016 and 2% in 2015.

The Southern Green Stink Bug causes unattractive stippling to the mature kernels and causes pre-mature drop of young nuts. It has potential to reduce the crop size and quality. Stink bug damage has historically increased during dry periods. As their preferred fabaceous host plants in pasturelands neighboring our orchards succumb to the dry weather and die, the stink bugs migrate to the macadamia trees as a secondary host plant. Losses from stink bug increased to 3.5% over the previous year average of 1.7%, it part due to dry weather from December 2015 to April 2016. Two natural enemies, a wasp and a fly, generally keep nut losses at acceptable levels. An insect known as the Koa Seed Worm (“KSW”) causes full-sized nuts to fall that have not completed kernel development. The Tropical Nut Borer Beetle (“TNB”) bores through the mature macadamia shell and feeds on the kernel. Nut damage caused by the TNB is not recorded as a defect by Royal Hawaiian. However, field surveys in 2016 indicate that nut losses attributed to TNB increased to 3.9%. Damages caused by each insect may fluctuate when unfavorable environmental conditions affect the natural enemy populations.

In March 2005, a foreign insect pest, the Macadamia Felted Coccid (“MFC”), or Eriococcus ironsidei, was detected on macadamia trees in the South Kona area on the island of Hawaii. The insect originates from Australia, where populations are kept under control from native predators and parasites. In Hawaii, however, in the absence of its natural enemies, MFC has become a serious problem on macadamia nut trees. The insect causes defoliation, weakening and breakage of large branches and limbs, and, in severe cases, may cause or contribute to tree death. Yearly surveys conducted in Ka’u have shown MFC to be present extensively throughout the orchards. Climatic conditions, particularly extremely dry weather, are conducive for increased MFC activity. Collaboration continued in 2016 with other growers and the State of Hawaii to control this pest. At this point in time, MFC is not fully understood. In particular, there is a deficit of information on how MFC is able to cause so much damage to such large trees and what level of production loss is attributed to MFC. Research is currently being conducted by the University of Hawaii to assess the level of crop loss due to MFC. Chemical treatments using products approved for use under federal and state laws are being performed throughout our Ka’u orchards. In 2016, 1,647 acres were sprayed for MFC in the Ka’u orchards. The populations are tracked in both treated and untreated areas. MFC was detected in our Keaau orchard in the spring of 2015. Treatment was administered shortly after detection. Both treated and untreated areas in the Keaau orchard continue to be monitored for MFC; however, due to the expedience of the treatment and the normal high levels of rainfall, the MFC population was low in 2016.

As indicated above, natural enemies are relied upon to manage insects that contribute to nut loss. Without these natural enemies, greater losses are possible. Approved pesticides may be available to manage economically significant insect pests; however, their use is limited to situations where treatment costs and nut loss justify their use, and when their use does not disrupt the natural enemy population.

Honey bees are placed in the orchards to supplement other insect pollinators during the flowering season. In late 2008, the Hawaii Department of Agriculture identified the Varroa mite on feral honey bees near the port of Hilo, Hawaii. This mite is an ectoparasite that attaches to the body of honey bees and weakens them, and can result in the destruction of bee hives and colonies. Apiaries that place hives in the macadamia nut orchards must manage this pest with miticide in order to maintain healthy bee colonies and avoid the development of resistance to the miticide.

Increases in these diseases and pests or our inability to successfully control these diseases and pests could result in decreases in production, including loss of trees in affected orchards, which could have a material adverse effect on our business, financial condition and results of operations.

Our orchards are susceptible to natural hazards such as wildfires, rainstorms, floods and windstorms, which may adversely affect nut production.

Our orchards are located in areas on the island of Hawaii that are susceptible to natural hazards, including drought, wildfires, heavy rains, floods, and windstorms. Our orchards located in the Ka’u region are susceptible to wildfires during periods of drought. In June and July 2012, a wildfire caused widespread damage to agricultural crops in the Ka’u region. The fire resulted in damage to irrigation pipes and approximately 24 tree acres of our macadamia nut orchards. Our orchards are also located in areas that are susceptible to storms which produce heavy rainfall. Twenty-seven major windstorms have occurred on the island of Hawaii since 1961, and six of those caused material losses to our orchards. In November 2000, the Ka’u region was affected by flooding, resulting in some nut loss. Since the flood in 2000, heavy rain and flooding in the Ka’u region has not been as damaging, but continue to be potential risks that can affect our nut production. On August 7, 2014, tropical storm Iselle made landfall on the island of Hawaii with high winds and heavy rain resulting in some tree damage and loss, increases in immature nut drop, and mature nut loss due to storm run-off. In January 2015, another windstorm swept through the Ka’u region and caused a 1% loss of canopy and trees in our orchards. Most of our orchards are surrounded by windbreak trees, which provide limited protection. Younger trees that have not developed extensive root systems are particularly vulnerable to windstorms. The occurrence of any natural disaster affecting a material portion of our orchards could have a material adverse effect on our business, financial condition and results of operations.

Our orchards are subject to risks from active volcanoes.

Our orchards are located on the island of Hawaii, where there are two active volcanoes. To date, no lava flows from either volcano have affected or threatened the orchards, but the risk remains.

Our business may be adversely affected by adverse or unseasonal weather conditions and climate change.

Poor, severe, or unusual weather conditions, whether caused by climate change or other factors, may adversely affect our nut production and our ability to harvest. Because our nut production is significantly influenced by weather, substantial changes to historical weather patterns in Hawaii, including changing temperature levels, changing rainfall patterns, and changing storm patterns and intensities, could significantly impact our future business, financial condition and results of operations.

The amount and timing of rainfall can materially impact nut production.

The productivity of orchards depends in large part on moisture conditions. Inadequate rainfall can reduce nut yields significantly, whereas excessive rain without adequate drainage can foster disease and hamper harvesting operations. Although rainfall at the orchards located in the Keaau region has generally been adequate and at times excessive for the orchards, the orchards located in the Ka’u area generally receive less rainfall. To supplement natural rainfall, a portion of the Ka’u orchards is presently irrigated. Irrigation can mitigate some of the effects of a drought, but currently it cannot completely supplement the complete needs of the trees and crops. The timing of rainfall relative to key development stages in the growing season can impact nut production. Excessive rains during the flowering season affects pollination and nut set at the Keaau orchards where flowering and the rainy season coincide. During 2016, the Ka’u and Keaau areas recorded 102% and 109%, respectively, of the 20-year average rainfall. However, the rainfall in Ka’u from December 2015 through April 2016, which is a critical flowering and nut development period, was recorded at 22% of the 20-year average and negatively impacted nut set and nut retention for the 2016 crop. Regardless of the timing, lack of or excess of adequate rainfall for prolonged periods of time will also negatively affect nut production.

We rely on irrigation water for our Ka’u orchards and orchards acquired from IASCO. If the capacities of those wells diminish or fail, we may not have an adequate water supply to irrigate our orchards, which could adversely affect our nut production.

With the May 2000 acquisition of the farming business, we acquired an irrigation well (the “Sisal Well”), which supplies water to our orchards in the Ka’u region. Historically, the quantity of water available from the Sisal Well has been generally sufficient to irrigate these orchards in accordance with prudent farming practices. The irrigated portion of the Ka’u II orchards is expected to need greater quantities of water as the orchards mature. We anticipate that the amount of water available from the Sisal Well will be generally sufficient, assuming average levels of rainfall, to irrigate the irrigated orchards in accordance with prudent farming practices for the next several years. If the amount of water provided by the Sisal Well becomes insufficient to irrigate the above-named orchards, we may need to incur additional costs to increase the capacity of the Sisal Well, drill an alternative well into the historical source that provides water to the Sisal Well or obtain water from other sources in order to avoid diminished yields.

Included in the assets we purchased from IASCO is an irrigation well (the “Palima Well”) that supplies water for the IASCO orchards, orchards owned by New Hawaii Macadamia Nut Co. (“NHMNC”), and trees owned by us on leased land from the State of Hawaii. Under a prior agreement with IASCO, NHMNC received a portion of the water pumped out of the Palima Well, and we, as the new owner of this well, are obligated to continue this service. The well provides supplemental irrigation and is generally sufficient, assuming average levels of rainfall, to sustain nut production at historical norms.

If insufficient irrigation water is available to the irrigated orchards, then diminished yields of macadamia nut production can be expected, which could have a material adverse effect on nut production.

Our insurance may not be sufficient to reimburse us for crop losses.

We obtain tree insurance each year under a federally subsidized program. The tree insurance for 2016 provides coverage up to a maximum of approximately $19.8 million against catastrophic loss of trees due to wind, fire or volcanic activity. Crop insurance was purchased for the 2016-2017 crop season and provides coverage for up to a maximum of approximately $8.6 million against loss of nuts due to wind, fire, volcanic activity, earthquake, adverse weather, wildlife damage and failure of irrigation water supplies. There is no assurance that such insurance will cover all losses incurred by the Partnership or that such insurance will be available or purchased in the same amount in future periods.

Fluctuations in various food and supply costs as well as increased costs associated with product processing and transportation could materially adversely affect our business, financial condition and operating results.

Both we and our manufacturers obtain some of the key ingredients used in our products from third-party suppliers. As with most food products, the availability and cost of raw materials used in our products can be significantly affected by a number of factors beyond our control, such as general economic conditions, growing decisions, government programs (including government programs and mandates relating to ethanol), weather conditions such as frosts, drought, and floods, and plant diseases, pests and other acts of nature. Because we do not control the production of raw materials, we are also subject to delays caused by interruptions in production of raw materials based on conditions not within our control. Such conditions include job actions or strikes by employees of suppliers, weather, crop conditions, transportation interruptions, natural disasters, sustainability issues and boycotts of products or other catastrophic events.

There can be no assurance that we or our manufacturers will be able to obtain alternative sources of raw materials at favorable prices, or at all, should there be shortages or other unfavorable conditions. In some instances, we enter into forward purchase commitments to secure the costs of projected commodity requirements needed to produce our finished goods. These commitments are stated at a firm price, or as a discount or premium from a future commodity price, and are placed with our manufacturers or directly with ingredient or packaging suppliers. There can be no assurance that our pricing commitments will result in the lowest available cost for the commodities used in our products. Our key raw material is macadamia nuts. We currently obtain the macadamia nuts for our products solely from our production in Hawaii. The inability to obtain macadamia nuts due to poor weather or for any reason could have a material adverse effect on our business. In addition, energy is required to process and produce our products. Transportation costs, including fuel and labor, also impact the cost of manufacturing our products. These costs fluctuate significantly over time due to factors that may be beyond our control.

Our inability or our manufacturers’ inabilities to obtain adequate supplies of raw materials for our products or energy at favorable prices, or at all, as a result of any of the foregoing factors or otherwise could cause an increase in our cost of sales and a corresponding decrease in gross margin, or cause our sales and earnings to fluctuate from period to period. Such fluctuations and decrease in gross margin could have a material adverse effect on our business, results of operations and financial conditions. There is no assurance that we would be able to pass along any cost increases to our customers in the form of price increases.

Our Depositary Units are not listed on a national securities exchange, which may make it more difficult to buy and sell Depositary Units and subjects us to fewer regulations than exchange-traded companies are subject to.

Our Depositary Units are currently traded on the OTCQX, which is an over-the-counter securities market, under the symbol “NNUTU.” The fact that our Depositary Units are not listed on a national securities exchange is likely to make trading such Depositary Units more difficult for broker-dealers, holders of Depositary Units and investors. In addition, it may limit the number of institutional and other investors that will consider investing in our Depositary Units, which may have an adverse effect on the price of our Depositary Units. It may also make it more difficult for the Partnership to raise capital in the future. In addition, because our Depositary Units are traded on the OTCQX, we are subject to fewer rules and regulations than if the Depositary Units were traded on NASDAQ Stock Market or another national securities exchange.

New potential accounting rules may adversely affect our financial statements and create difficulty in meeting loan covenants.

In February 2016, the FASB issued ASU 2016-02, “Leases.” The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset (the lessee’s right to use the leased asset) and a liability (the future rent payment obligations) on the balance sheet for all leases with terms longer than 12 months. Currently, all of our orchard leases are accounted for as operating leases, with no related assets and liabilities on our balance sheet. The new standard is effective for fiscal years beginning after December 15, 2018. The Partnership is currently assessing the impact of the adoption of ASU 2014-09 on its consolidated financial statement, but these changes could significantly change our reported or expected financial performance.

We may need to renegotiate certain contracts, such as debt agreements, to address the impact on debt covenants of reporting lease liabilities on the balance sheet. For instance, the balance sheet reporting may affect our net worth and we may not be able to meet the minimum tangible net worth requirement as originally provided for under our present debt agreements with AgCredit PCA and AgCredit FLCA. We will also need to ensure that our systems are capable of processing the required information to satisfy the proposed requirements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the Partnership expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue which is recorded. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.” This update deferred the effective date for implementation of this standard by one year. ASU 2014-09 is now effective for annual periods beginning after December 15, 2017, including interim periods within that period. The Partnership anticipates adopting this guidance in the first quarter of 2018 and is evaluating the impact of adoption of the new rules on the Partnership’s consolidated financial statements.

Unauthorized access to confidential information and data on our information technology systems and security and data breaches could materially adversely affect our business, financial condition and operating results.

As part of our operations, we rely on our computer systems to manage inventory, process transactions, communicate with our suppliers and other third parties, and on continued and unimpeded access to secure network connections to use our computer systems. We have physical, technical and procedural safeguards in place that are designed to protect information and protect against security and data breaches as well as fraudulent transactions and other activities. Despite these safeguards and our other security processes and protections, we cannot be assured that all of our systems and processes are free from vulnerability to security breaches (through cyberattacks, which are evolving and becoming increasingly sophisticated, physical breach or other means) or inadvertent data disclosure by third parties or by us. A significant data security breach, including misappropriation of customer, distributor or employee confidential information, could cause us to incur significant costs, which may include potential costs of investigations, legal, forensic and consulting fees and expenses, costs and diversion of management attention required for investigation, remediation and litigation, substantial repair or replacement costs. We could also experience data losses that would impair our ability to manage inventories or process transactions and a negative impact on our reputation and loss of confidence of our customers, distributors, suppliers and others, any of which could have a material adverse impact on our business, financial condition and operating results.

We have previously identified material weaknesses in our internal control over financial reporting which, if not remediated, could have resulted in material misstatements in our financial statements. Additional material weaknesses could arise in the future.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

During the first quarter of 2016, we concluded that certain material weaknesses existed as of December 31, 2015. Specifically, management identified control deficiencies that constitute individually, or in the aggregate, material weaknesses in our internal control over financial reporting related to our account reconciliation process and inadequate segregation of duties.

As of June 30, 2016, the following measures, among others, had been implemented to address the material weaknesses identified as of December 31, 2015:

As a result of these actions, management concluded that the previously identified material weaknesses were remedied at June 30, 2016. Although management concluded that the material weaknesses in our internal control over financial reporting have been remediated, we expect to continue implementing measures to improve our internal control over financial reporting, including upgrading our financial accounting systems and recruiting further accounting and/or finance staff, as necessary, in order to maintain an effective control environment.

We cannot assure that additional material weaknesses will not arise in the future.

Risks Related to Concentrated Control of Our Depositary Units

Significant influence over the Partnership’s affairs may be exercised by certain holders of Depositary Units. One couple controls over 66 ⅔% of the Depositary Units and owns a controlling interest in the Managing Partner, which gives them the ability to control or block significant transactions of the Partnership.

As of the Record Date, the holders of Depositary Units holding more than 5% of our Depositary Units were the Ebrahimis (with approximately 67.7% beneficial ownership) and Barry W. Blank (with approximately 7.8% beneficial ownership). The Ebrahimis have the ability to control or block approvals that may be sought from holders of Depositary Units, including mergers, sales of substantial assets and modifications to our Partnership Agreement, which generally require approval by holders of a majority of the Depositary Units. The Ebrahimis also own a controlling interest in the sole shareholder of the Managing Partner. See “Our Partnership Agreement—Management.” On June 30, 2016, the Partnership sold all of the issued and outstanding shares of capital stock of the Managing Partner to Crescent River Agriculture LLC (a company controlled by the Ebrahimis), effectively giving the Ebrahimis control of the Partnership.

Effective October 1, 2009, Bradford C. Nelson was elected as a director of the Managing Partner and on May 18, 2016 he was elected President, Principal Financial Officer, Principal Accounting Officer and Secretary of the Managing Partner. Mr. Nelson is the President and owner of West Sedge, Inc., which provides finance and management services to businesses and family offices, including companies owned by the Ebrahimi family and companies owned by Mr. Fred Ebrahimi. Effective December 2012, Barry W. Blank was elected as a director of the Managing Partner. There is no affiliation between the Ebrahimis and Mr. Blank. It is possible that the interests of the Ebrahimis or Mr. Blank could conflict with the interest of other holders of Depositary Units.

The significant holdings of Depositary Units by the Principal Holders may adversely impact the market price of our Depositary Units and deter bids to acquire the Partnership.

The significant concentration of Depositary Unit holdings may deter persons desiring to make bids to acquire the Partnership because they may not be able to do so without the cooperation of the principal holders of Depositary Units. In addition, if the principal holders or other large holders of Depositary Units were to sell a large number of the Partnership’s Depositary Units, the market price of our Depositary Units could decline significantly. Furthermore, the perception in the public market that the principal holders or other large holders of Depositary Units might sell their Depositary Units could depress the market price of our Depositary Units, regardless of their actual plans.

Holders of Depositary Units have limited voting rights, and the Managing Partner cannot be changed unless the Ebrahimis vote in favor of the change.

Holders of Depositary Units have limited voting rights on matters affecting the Partnership’s business, which may have a negative effect on the price at which the Depositary Units trade. In particular, the holders of Depositary Units do not elect the directors of the Managing Partner. Furthermore, if holders of Depositary Units are not satisfied with the performance of the directors, they may find it difficult to remove any or all of the directors because the Partnership Agreement requires a vote of at least 66 ⅔% of the outstanding Depositary Units to remove the Managing Partner. No change of the Managing Partner can be effected unless the Ebrahimis vote their Depositary Units in favor of the change.

Ownership of the Partnership’s Depositary Units is different from ownership of stock, and unlike stockholders, holders of our Depositary Units do not have the right to elect directors of our Managing Partner.

Although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business, limited partnership interests are inherently different from the capital stock of a corporation. The Depositary Units represent limited partnership interests. The rights of a Depositary Unit holder differ substantially from rights of a stockholder in many important respects. In particular, management of the Partnership is (except for certain specific matters requiring approval of Depositary Unit holders) vested in the Managing Partner. Although holders of 66 2/3% of the Depositary Units have the power to remove and replace the Managing Partner, Depositary Unit holders do not have the power to vote upon the composition of the Managing Partner’s board of directors. In addition, since the Ebrahimis control approximately 67.7% of the Depositary Units, the Managing Partner cannot be changed unless the Ebrahimis vote their Depositary Units in favor of the change. Moreover, the right of Depositary Unit holders to participate in governance of the Partnership through the exercise of voting rights is limited to certain specified matters.

Risks Related to the Food Industry

Our advertising is subject to regulation by the Federal Trade Commission under the Federal Trade Commission Act, which prohibits dissemination of false or misleading advertising.

The National Advertising Division of the Council of Better Business Bureaus, Inc., which we refer to as NAD, administers a self-regulatory program of the advertising industry to ensure truth and accuracy in national advertising. NAD monitors national advertising and entertains inquiries and challenges from competing companies and consumers. Should our advertising be determined to be false or misleading, we may have to pay damages, withdraw our campaign and possibly face fines or sanctions, which could have a material adverse effect on our sales and operating results.

Adverse publicity or consumer concern regarding the safety and quality of food products or health concerns, whether with our products or for food products in the same food group as our products, may result in the loss of sales.

We are highly dependent upon consumers’ perception of the safety, quality and possible dietary benefits of our products. As a result, substantial negative publicity concerning one or more of our products or other foods similar to or in the same food group as our products could lead to a loss of consumer confidence in our products, removal of our products from retailers’ shelves and reduced prices and sales of our products. Product quality, contamination, or safety issues, actual or perceived, or allegations of product contamination, even when false or unfounded, could hurt the image of our brands and cause consumers to choose other products. Furthermore, any product recall, whether by us or by a third party within one of our categories or due to real or unfounded allegations, could damage our brand image and reputation. By way of example, there have been recent recalls of pistachio and macadamia nuts produced by third parties due to Salmonella contamination. While we roast all of the nuts in our branded products to limit the risk of bacterial contamination and our purchasers of bulk kernel are expected to roast the nuts prior to sale, we cannot assure you that roasting will be conducted sufficiently or will prevent all instances of contamination, that our processors, co-packers and distributors will comply with our specifications, or that every purchaser of our nuts in bulk will in fact roast and properly handle the nuts prior to sale. Any of these events could subject us to significant liability and have a material adverse effect on our business, results of operations and financial condition. If we conduct operations in a market segment that suffers a loss in consumer confidence as to the safety and quality of food products, our business could be materially adversely affected. The food industry has recently been subject to negative publicity concerning the health implications of GMOs, obesity, trans fat, diacetyl, artificial growth hormones, arsenic in rice and bacterial contamination, such as Salmonella and aflatoxins. Consumers may increasingly require that foods meet stricter standards than are required by applicable governmental agencies, thereby increasing the cost of manufacturing such foods and ingredients. Developments in any of these areas, including, but not limited to, a negative perception about our formulations, could cause our operating results to differ materially from expected results. Any of these events could harm our sales, increase our costs and hurt our operating results, perhaps significantly.

We may experience increased competition for raw materials and from other producers of food products if the trend for non-GMO products continues, as well as increased regulation of our products, which could have a material adverse effect on our business.

Our products contain only non-GMO ingredients. The food industry has been experiencing a significant trend in which an increasing number of consumers are requiring only non-GMO ingredients in their foods. Legislation could require companies to move to non-GMO labeling or ingredients. Such industry trends or legislation could result in changes to our labeling, advertising or packaging. As additional retailers require or consider requiring all of their products to be non-GMO, we may face increased competition for sources of raw materials that are non-GMO. Such industry pressure may be particularly problematic in the United States, where most farmers produce genetically modified foods, making it difficult to source non-GMO ingredients and raw materials. There is also a risk of contamination of non-GMO farms by neighboring GMO farms. Although the trend toward non-GMO products could be positive for our sales, an increase in competition and regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.

As our business increases in size, we will need to locate and contract qualified co-packers with sufficient dedicated space for our non-GMO, gluten-free products, and there is no assurance that we will be able to do so.

We rely on a single co-packer for certain products. If demand for gluten-free products grows, we will need to increase our production through additional co-packers to ensure that we have sufficient supply to meet increasing demand. There is no assurance that we will be able to find available, qualified co-packers or that we will be able to negotiate contracts with them on commercially reasonable terms or at all.

Our business operations are subject to numerous laws and governmental regulations, exposing us to potential claims and compliance costs that could adversely affect our operations.

Manufacturers and marketers of food products are subject to extensive regulation by the U.S. Food and Drug Administration (the “FDA”), the U.S. Department of Agriculture (the “USDA”), and other national, state and local authorities. For example, the Food, Drug and Cosmetic Act and the new Food Safety Modernization Act and their regulations govern, among other things, the manufacturing, composition and ingredients, packaging and safety of foods. Under these acts, the FDA regulates manufacturing practices for foods through its current “good manufacturing practices” regulations, imposes ingredient specifications and requirements for many foods, inspects food facilities and issues recalls for tainted food products. Additionally, the USDA has adopted regulations with respect to a national organic labeling and certification program.

Food manufacturing facilities and products are also subject to periodic inspection by federal, state and local authorities. State regulations are not always consistent with federal regulations or other state regulations.

Any changes in laws and regulations applicable to food products could increase the cost of developing and distributing our products and otherwise increase the cost of conducting our business, any of which could materially adversely affect our financial condition. In addition, if we fail to comply with applicable laws and regulations, including future laws and regulations, we may be subject to civil liability, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on our business, financial condition, results of operations or liquidity.

We may be subject to significant liability should the consumption of any food products manufactured or marketed by us cause injury, illness or death.

Regardless of whether such claims against us are valid, they may be expensive to defend and may generate negative publicity, both of which could materially adversely affect our operating results. The sale of food products for human consumption involves the risk of injury to consumers. Such injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of bacterial contamination, foreign objects, substances, chemicals, other agents or residues introduced during production processes. Although we believe that we and our manufacturers are in material compliance with all applicable laws and regulations, if the consumption of our products causes or is alleged to have caused an illness in the future, we may become subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding an illness, injury or death could materially adversely affect our reputation with existing and potential customers on a permanent basis as well as our corporate image and operating results. Moreover, claims or liabilities of this nature might not be covered by insurance or by any rights of indemnity or contribution that we may have. Although we have product liability insurance coverage in amounts we believe to be adequate, we cannot be sure that claims or liabilities will be asserted for which adequate insurance will be available or that such claims or liabilities will not exceed the available amount of insurance coverage. Our food products may also experience product tampering, contamination or spoilage, or be mishandled or mislabeled, or otherwise damaged. Under certain circumstances, a product recall could be initiated, leading to a material adverse effect on our reputation, operations and operating results. Recalls may be required to avoid seizures or civil or criminal litigation or due to market demands. Even if such a situation does not necessitate a recall, product liability claims could be asserted against us. A product liability judgment or a product recall involving us or a third party within one of our categories could have a material adverse effect on our business, financial condition, results of operations or liquidity and could impair the perception of our brand for an extended period of time. Even if we have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our business, results of operations, liquidity, financial condition and brand image.

The food industry has been subject to a growing number of claims, including class action lawsuits based on the nutritional content of food products and on disclosure and advertising practices. We may face these types of claims and proceedings and, even if we are successful in defending these claims, publicity about these matters may harm our reputation and adversely affect our results. In addition, suits against our competitors can harm our business. These types of class action lawsuits can also make it more difficult for us to market our products by restricting our ability to differentiate the functional food aspects of our products from other products on the market. Furthermore, the defense of class action lawsuits can result in significant costs, which are oftentimes not covered by insurance, can be time-consuming and can divert the attention of management from other matters relating to our business.

The food industry is highly competitive, and we compete with many companies that have greater resources than we do.

Numerous multinational, regional and local firms currently compete, or are capable of competing, with us. Our products compete with branded products as well as generic and private-label products of food retailers, wholesalers and cooperatives. We compete primarily on the basis of product quality, ability to satisfy specific consumer needs (including gluten-free needs), brand recognition, brand loyalty, service, marketing, advertising and price. Some competitors may have different profit or strategic objectives than we do. Some competitors may invest in discounts or trade credit at a time when we are investing in new packaging and promotion, or vice versa. Competitors may develop new patentable technology that results in products which are able to compete successfully with our products. Substantial advertising and promotional expenditures are required to maintain or improve a brand’s market position or to introduce a new product, and participants in our industry are engaging with new media, including customer outreach through social media and web-based vehicles, which require additional staffing and financial resources.

Our largest principal competitors in the macadamia snack food market are Mauna Loa, Mac Farms and companies that sell under private labels. We also compete with manufacturers and marketers of non-macadamia nut snack food products, including snack products marketed by large national companies, which have substantially greater market presence, longer operating histories, better distribution, and greater financial, marketing, capital and other resources than we do. Our ability to gain or maintain market share may be limited as a result of actions by competitors or by the limited advertising and promotional resources available to us.

Successful new product introductions are important to growing our business, and there is no guarantee that buyers will accept our products for their stores or set reasonable prices for our products.

Even when stores accept our products, we still must expend resources to create consumer awareness and generate interest in our products. In addition, competitors may offer significant price reductions, and we cannot ensure that consumers will find our products suitably differentiated from products of our competitors.

The food industry and retailers in the grocery industry use new products as a way of creating excitement and variety of choices to attract consumers. There is a risk that we will be unable to develop new product technologies to address consumer demands. Even if we identify new innovations, the cost may be prohibitive, the products’ taste may not meet customer standards, there may be high introductory costs, we may have limited financial resources available for new product launches, there may be regulatory restrictions on the production and advertising of our new products, and our new products may take away sales from our other products. In addition, underperformance on new product launches can damage overall brand credibility with customers.

Our ability to develop, market and sell new products at an appropriate price may be hampered by the inability to get shelf space for our products at a reasonable cost or, once placed, to have an attractive price for our products. Competitors, many of whom have greater resources than we do, vie for the same shelf placement and may offer incentives to the retailers that we cannot match. In addition, unattractive shelf placement and pricing may put us at a disadvantage relative to our competitors.

Furthermore, there is a trend among retailers in the grocery industry to reduce the overall number of products offered in their stores, further increasing competition for shelf space and making it more difficult for us to keep existing products on the shelf and introduce new products with these retailers. Even if we do obtain shelf placement, our products may fail to achieve the sales expectations held or set by our retailers, potentially causing these retailers to remove our products from the shelf. As companies face more pressure for shelf space within each category, the increase in the number and quality of private-label products continues to affect branded products.

We may need to increase our marketing and advertising spending to obtain and keep shelf placement for our products, create consumer awareness, protect and grow our existing market share, or promote new products, any of which could impact our operating results. The inability to stay current with healthy snack food trends through new products could materially adversely affect our business performance.

The consolidation of retail customers could adversely affect us.

Retail customers, such as supermarkets, warehouse clubs and food distributors, continue to consolidate, resulting in fewer customers on which we can rely for business. Consolidation also produces larger, more sophisticated retail customers that can resist price increases and demand lower pricing, more promotional programs or specifically tailored products. In addition, larger retailers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own retailer brands. Further retail consolidation and increasing retail bargaining power could materially and adversely affect our product sales, financial condition and results of operations.

If we need to compete with other manufacturers or with retailer brands on the basis of price, our business and results of operations could be negatively impacted.

Our branded products face competition from private label products that at times may be sold at lower price points. The impact of price gaps between our products and private-label products may result in share erosion and harm our business. A number of our competitors have broader product lines, substantially greater financial and other resources and/or lower fixed costs than we have. Our competitors may succeed in developing new or enhanced products that are more attractive to customers or consumers than ours are. These competitors may also prove to be more successful in marketing and selling product than we are, and may be better able to increase prices to reflect cost pressures. We may not compete successfully with these other companies or maintain or grow the distribution of our products. We cannot predict the pricing, commodity costs, or promotional activities of our competitors or whether they will have a negative effect on us. Many of our competitors engage in aggressive pricing and promotional activities. There are competitive pressures and other factors which could cause our products to lose market share and our sales to decline, or result in significant price or margin erosion, which would have a material effect on our business, financial condition and results of operations.

Risks Related to this Rights Offering

If you do not exercise your subscription rights, your interest in the Partnership will be diluted.

Holders of Depositary Units who do not fully exercise their basic subscription rights should expect that they will, at the completion of this offering, own a smaller proportional interest in the Partnership than would otherwise be the case had they fully exercised their basic subscription rights.

You do not have the right to revoke the exercise of subscription rights, and thus you could be committed to buying Depositary Units above the prevailing market price.

Once you exercise your subscription rights, you may not revoke such exercise even if you later learn information that you consider to be unfavorable to the exercise of your subscription rights. The market price of our Depositary Units may decline prior to the expiration of this offering, or a rights holder may not be able to sell Depositary Units purchased in this offering at a price equal to or greater than the subscription price. Until Depositary Units are delivered upon expiration of this Rights Offering, you will not be able to sell or transfer the Depositary Units that you purchase in this Rights Offering. Any such delivery will occur as soon as practicable after this Rights Offering has expired, payment for the Depositary Units subscribed for has cleared, and all calculations and reductions contemplated by the terms of this Rights Offering have been effected.

This Rights Offering may cause the trading price of our Depositary Units to decrease.

The subscription price, together with the number of Depositary Units we propose to issue and ultimately will issue in this Rights Offering, may result in an immediate decrease in the market value of our Depositary Units. This reduced price may continue throughout and after the completion of this Rights Offering. If that occurs, you may have committed to buy Depositary Units in the Rights Offering at a price greater than the prevailing market price of our Depositary Units. Furthermore, if a substantial number of subscription rights are exercised and the holders of the new Depositary Units received upon exercise of those subscription rights choose to sell some or all of the new Depositary Units, the resulting sales could depress the market price of our Depositary Units. Following the exercise of your subscription rights, you may not be able to sell your Depositary Units at a price equal to or greater than the subscription price.

The net proceeds we receive from the Rights Offering may be lower than we currently anticipate.

We do not have any formal commitments from any of our holders of Depositary Units to exercise their subscription rights in this Rights Offering, and we cannot assure you that any of our holders of Depositary Units will exercise all or any part of their basic subscription right or their over-subscription privilege. If holders of Depositary Units subscribe for fewer Depositary Units than we currently anticipate, the net proceeds we receive from this Rights Offering could be significantly lower than we currently expect and we may not be able to adequately finance the growth of our branded product segment.

The subscription price for this offering is not an indication of the fair value of the Partnership’s Depositary Units.

The subscription price of the Depositary Units offered in this Rights Offering has been determined unilaterally by the board of directors of the Managing Partner. In setting the subscription price, the board of directors considered our current financial condition, including the significant amount of short-term debt, our history of losses over the last several years, the risk that we may not be able to maintain our operations as a going concern, the current trading price of the Depositary Units on the OTCQX, the historical market price for the Depositary Units, the volume of trading on the OTCQX, fluctuations in the market price of the Depositary Units, and other factors relating to us and the market for our Depositary Units. The subscription price does not necessarily bear any relationship to the book value of our assets, results of operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the subscription price as an indication of the fair value of our Depositary Units. After the date of this prospectus, our Depositary Units may trade at prices above or below the subscription price.

If you do not act on a timely basis and follow subscription instructions, your exercise of subscription rights may be rejected.

Holders of subscription rights who desire to purchase Depositary Units in this offering must act on a timely basis to ensure that all required forms and payments are actually received by the subscription agent prior to 5:00 p.m., Eastern Time, on the Expiration Date. If you are a beneficial owner of Depositary Units and you wish to exercise your subscription rights, you must act promptly to ensure that your broker, dealer, custodian bank, trustee or other nominee acts for you and that all required forms and payments are actually received by your broker, dealer, custodian bank, trustee or other nominee in sufficient time to deliver such forms and payments to the subscription agent prior to 5:00 p.m., Eastern Time, on the Expiration Date. We will not be responsible if your broker, dealer, custodian bank, trustee or other nominee fails to ensure that all required forms and payments are actually received by the subscription agent prior to 5:00 p.m., Eastern Time, on the Expiration Date.

If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or otherwise fail to follow the subscription procedures that apply to your exercise in this Rights Offering, the subscription agent may, depending on the circumstances, reject your subscription or accept it only to the extent of the payment received. Neither we nor the subscription agent undertakes any obligation to contact you concerning an incomplete or incorrect subscription form or payment, nor are we under any obligation to correct such forms or payment. We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedures.

You may not receive all of the Depositary Units for which you subscribe.

Over-subscription requests will only be honored if and to the extent that basic subscription rights have not been exercised in full. Any available Depositary Units will be allocated pro rata among the rights holders exercising the over-subscription privilege in proportion to the number of basic subscription rights a holder exercised, relative to the aggregate number of basic subscription rights exercised by all holders electing to over-subscribe. American Stock Transfer & Trust Company, LLC the subscription agent for the Rights Offering, will make any prorating calculations with respect to each exercise of an over-subscription privilege. If you exercise your subscription rights through a broker, dealer, custodian bank or other nominee, that nominee may have different procedures with respect to aggregating exercises of rights; please contact your nominee for more information.

Tax Risks of Receiving and Exercising the Subscription Rights and of Owning Depositary Units

Any tax benefits of investment in our Depositary Units are not certain.

The anticipated after-tax benefit of an investment in our Depositary Units depends largely on the treatment of the Partnership as a partnership for U.S. federal income tax purposes, as well on as the Partnership not being subject to a material amount of entity-level taxation by individual states. If the Partnership were to be treated as a corporation for U.S. federal income tax purposes or become subject to additional amounts of entity-level taxation for state tax purposes, then the Partnership’s cash available for distribution to holders of Depositary Units could materially decline.

Our branded products line of business operates through a corporate subsidiary which may result in increased taxes.

Our branded products line of business is conducted through Royal, a wholly-owned separate, taxable corporation, so that the Partnership will not be considered to be engaging in a substantial new line of business that would terminate its status as an Electing 1987 Partnership (as defined by the Internal Revenue Code of 1986, as amended (“Code”)). The Partnership’s transactions with Royal may be subject to federal, state or local taxes, and any income or gain that the Partnership derives from those transactions would be included in the Partnership’s income or gain that flows through to a holder of Depositary Units. In addition, distributions that the Partnership receives from Royal will be taxable dividends to the extent of Royal’s earnings and profits. Conversely, losses that may be incurred by the Partnership as a result of transactions with Royal may be subject to deferral or disallowance, and tax losses in Royal may not be available to offset the taxable income of the Partnership. Because Royal is subject to federal and state income tax, Royal’s income available for distribution will be reduced by those taxes. The Partnership has recorded a valuation allowance equal to 100% of Royal’s deferred tax asset due to the uncertainty regarding future realization of Royal’s net operating loss carry forwards (“NOLs”).

You may be required to recognize taxable gain upon the distribution of the subscription rights.

We do not anticipate reporting the issuance of subscription rights as a taxable event for our existing holders of Depositary Units. However, the tax consequences related to the distribution of the subscription rights are uncertain, and the Internal Revenue Service (“IRS”) may adopt positions that differ from the positions that we expect to adopt. Specifically, the IRS may take the position that, upon the receipt of subscription rights, you should recognize taxable gain to the extent (if any) that the fair market value of the subscription rights that you receive exceeds your adjusted basis in the Depositary Units. See “Material U.S. Federal Income Tax Consequences—Rights Offering—Receipt of Rights.”

You may be allocated additional taxable income if you exercise your subscription rights.

We may allocate taxable gross income to a Depositary Unit holder that exercises a subscription right regardless of whether or how long the holder continues to own Depositary Units after the time of exercise. Such allocation will be made to exercising Depositary Unit holders in amounts, if any, that will result in uniform capital accounts being associated with the Units. See “Material U.S. Federal Income Tax Consequences—Rights Offering—Exercise of Rights.”

Your tax liability from the ownership of Depositary Units may exceed your distributions from the Partnership.

The tax liability of holders of Depositary Units with respect to their Depositary Units could exceed their distributions from the Partnership with respect to Depositary Units. Holders of Depositary Units will generally be treated as partners to whom the Partnership will allocate taxable income, which can differ in amount from the cash distributed to holders of Depositary Units. Depositary Unit holders will be required to include their allocable share of the Partnership’s income in gross income for U.S. federal income tax purposes and, in some cases, for state and local income tax purposes, and to pay any taxes due thereon, even if they have not received a cash distribution from the Partnership for their allocable share of Partnership income.

Tax gain or loss on the disposition of Depositary Units could be more or less than expected.

A holder of Depositary Units who disposes of Depositary Units will recognize gain or loss equal to the difference between the amount realized and the tax basis of such Depositary Units. Because distributions to a holder of Depositary Units reduces the adjusted tax basis of the holder’s Depositary Units, the amount, if any, of such distributions with respect to the Depositary Units disposed of will, in effect, become taxable income if the Depositary Units are sold at a price greater than the tax basis of the holder of Depositary Units, even if the price received is less than the holder’s original cost.

You will bear the tax liability on any income allocable to you.

The book and tax treatment of the Depositary Units has changed over the years, and at this time for tax purposes a holder of Depositary Units will experience higher earnings or lower loss compared to the income determined under accounting principles generally accepted in the United States of America (“GAAP”). Furthermore, given our current finances and restrictions on distributions under our current credit agreements, holders of Depositary Units should not expect to receive any distributions with respect to their Depositary Units and, thus, will bear the tax liability on any income allocable to them.

You may become subject to state and local taxes with respect to the Partnership’s activities.

A holder of Depositary Units may be subject to state and local taxes and return filing requirements in the states where the Partnership owns property or conducts business.

The IRS may contest our tax positions, which could change the after-tax value of your investment.

The IRS may disagree with the tax positions that we take. We may need to undertake administrative or judicial proceedings to defend our tax positions. The holders of Depositary Units will indirectly bear the costs of any such contest. We may not prevail in a tax contest. The existence of a tax contest may adversely affect the market for Depositary Units. An adverse ruling by the IRS could change the after-tax value of your investment.

The Partnership may lose its status as an Electing 1987 Partnership taxable as a partnership or otherwise become taxable as a corporation, which could result in a substantial reduction in the value of the Depositary Units.

The Partnership would be taxable as a corporation but for its status as an Electing 1987 Partnership, which allows the Partnership to be taxed as a partnership for U.S. federal income tax purposes. If the Partnership were to lose its status as an Electing 1987 Partnership and otherwise not qualify to be treated as a partnership under the publicly traded partnership rules, or if the Partnership were to otherwise become taxable as a corporation, the Partnership would be taxed as a corporation and subject to U.S. federal and state taxation at the Partnership level. Distributions to Depositary Unit holders would be treated either as a taxable dividend of current and accumulated earnings and profits or, in the absence of earnings and profits, as a nontaxable return of capital or taxable capital gain. Thus, taxation as a corporation would likely result in a material reduction of after-tax return to holders of Depositary Units, and thus would likely result in a substantial reduction in the value of the Depositary Units. Please read “Material U.S. Federal Income Tax Consequences—Partnership Status—Consequences of Loss of Partnership Status.”

If the IRS contests the federal income tax positions we take, the market for our Depositary Units may be adversely affected, the cost of any IRS contest will likely reduce cash available for distribution, and if adjustments to income are required, holders may be required to amend their tax returns and pay interest and penalties on any additional tax resulting from such adjustments.

If the IRS challenges to a tax position that we adopt, it may be necessary to resort to administrative or court proceedings to defend the allocations. Any contest with the IRS may materially and adversely impact the market for our Depositary Units and the price at which they trade. The cost of defending our tax position will increase the Partnership’s expenses and will likely reduce the cash available for distribution. In addition, if an adjustment to our tax reporting positions is required, holders of Depositary Units may be required to amend their income tax returns for the year(s) in question and pay interest and penalties on any additional tax resulting from the adjustment.

Recently enacted legislation alters the procedures for assessing and collecting taxes due for taxable years beginning after December 31, 2017, in a manner that could substantially reduce the cash available for distribution to Depositary Unit holders.

Recently enacted legislation, applicable to the Partnership for taxable years beginning after December 31, 2017, alters the procedures for auditing large partnerships and also alters the procedures for assessing and collecting taxes due (including applicable penalties and interest) as a result of an audit. Under the new rules, unless we are eligible to, and do, elect to issue revised Schedules K-1 to our Depositary Unit holders with respect to an audited and adjusted return, the IRS may assess and collect taxes (including any applicable penalties and interest) directly from the Partnership in the year in which the audit is completed. Such tax liability will be determined without regard to Depositary Unit holder-level tax items that could otherwise reduce tax due on any adjustments. If we are required to pay taxes, penalties and interest as a result of audit adjustments, cash available for distribution to our Depositary Unit holders may be substantially reduced. In addition, because payment would be due for the taxable year in which the audit is completed, Depositary Unit holders during that taxable year would bear the expense of the adjustment even if they were not Depositary Unit holders during the audited taxable year. If permitted under future guidance from the IRS, the Partnership might elect to have the assessment made against the holders of Depositary Units in the year under review in which event each holder of Depositary Units would be required to take into account such adjustment at the their level and pay additional tax for the current year.

The Partnership’s allocations of profits and losses may not be respected by the IRS, which could result in changes to income allocation requiring holders to amend their tax returns and pay interest and penalties on any additional tax resulting from such adjustments.

We intend to allocate profits and losses in a manner consistent with the requirements of the Code. However, the IRS rules that govern the allocations of profits and losses, particularly with respect to allocations to be made to maintain the uniformity of Depositary Units, to account for differences between the book and tax capital accounts of holders of Depositary Units, to account for the purchase of Depositary Units through the exercise of subscription rights, and to account for varying prices paid by holders of Depositary Units to purchase their Depositary Units, including through purchases of Depositary Units through the exercise of subscription rights, are complex and uncertain, and there is no assurance that the IRS will respect the allocation methods utilized by the Managing Partner. If there is an IRS challenge, we will likely incur administrative costs to defend the allocations. The cost of defending the allocations will increase our expenses and will likely reduce the cash available for distribution, and may reduce the value of the Depositary Units. In addition, if an adjustment is required, holders of Depositary Units may be required to amend their income tax returns for the year(s) in question and pay interest and penalties on any additional tax resulting from the adjustment. If the IRS were to make adjustments to allocations in an audit of the Partnership for a taxable year commencing after December 31, 2017, the Partnership itself could incur tax liability as a result of such audit adjustments.

The IRS may challenge our treatment of each purchaser of our Depositary Units as having the same tax treatment without regard to the actual Depositary Units purchased, which could result in audit adjustments to holders of Depositary Units.

In order to maintain the uniformity of our Depositary Units so that they can be publicly traded, and because we are unable to match transferors and transferees of Depositary Units, we have adopted certain depreciation and amortization positions that may not conform in all respects to Treasury Regulations. A successful IRS challenge of these positions could adversely affect the amount or timing of tax benefits available to holders of Depositary Units and could adversely affect the value of our Depositary Units or result in audit adjustments to holders of Depositary Units.

The IRS may challenge our allocation of items of income, gain, loss and deduction between transferors and transferees of our Depositary Units, which could change the allocation of such items among owners of Depositary Units.

We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our Depositary Units based upon the ownership of our Depositary Units on the first business day of each month. However, gross income may be allocated to a Depositary Unit holder that exercises a subscription right regardless of whether or how long the holder continues to own Depositary Units after the time of exercise. Our allocation methods may not be permitted under existing Treasury Regulations and could be challenged by the IRS. Our counsel is unable to opine as to the validity of our allocation methods in the absence of Treasury Regulations or other guidance that approve of our allocation methods. If the IRS were to successfully challenge our proration method, the allocations of items of income, gain, loss and deductions among holders of Depositary Units may be changed.

A holder of Depositary Units whose Depositary Units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of Depositary Units) may be considered as having constructively disposed of those Depositary Units, may no longer be treated for federal income tax purposes as a partner with respect to those Depositary Units during the period of the loan, and may recognize gain or loss from the constructive disposition.

A holder of Depositary Units whose Depositary Units are the subject of a securities loan may be considered as having disposed of the loaned Depositary Units for U.S. federal income tax purposes. In that case, such holder may no longer be treated for such purposes as a partner in the Partnership with respect to those Depositary Units during the period of such loan and the holder may recognize gain or loss from such disposition. Moreover, during the period of the loan, any of our income, gain, loss or deduction with respect to those Depositary Units may not be reportable by such holder and any cash distributions received by the holder as to those Depositary Units could be taxable as ordinary income. Holders of Depositary Units desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller should modify any applicable brokerage account agreements to prohibit their brokers from borrowing their Depositary Units.

Tax-exempt entities and non-U.S. persons face tax issues from owning Depositary Units that may result in adverse tax consequences to them.

The investment in Depositary Units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (“IRAs”), and non-U.S. persons raises issues unique to such investors. For example, virtually all of our income allocated to organizations that are exempt from U.S. federal income tax, including IRAs and other retirement plans, is unrelated business taxable income and is taxable to them. Distributions to non-U.S. persons are reduced by withholding taxes, and non-U.S. persons are required to file U.S. federal tax returns and pay tax on their shares of our taxable income.

Use of Proceeds

Assuming subscription rights to purchase all 11,100,000 Depositary Units are exercised, we estimate that the net proceeds of this Rights Offering, after deducting estimated expenses of the offering payable by the Partnership, will be approximately $19,654,000. Because there is no minimum number of Depositary Units that must be sold in this Rights Offering, we can provide no assurance regarding the amount of capital we will actually raise in this Rights Offering. We intend to use the net proceeds we receive from the offering (i) to repay the debt outstanding under the 2015 Bridge Loan, which was incurred to acquire the Becker orchards; (ii) to purchase capital equipment; and (iii) for general partnership purposes, which may include, among other things, repaying or refinancing all or a portion of the indebtedness outstanding under our revolving credit facility, funding working capital, and acquiring land, orchards and related businesses.

The table below lists the intended uses of the net proceeds we receive from the offering, with their order of priority and the estimated amounts intended to be allocated to each, assuming the Rights Offering is fully subscribed. If the Rights Offering is not fully subscribed, proceeds of the offering will be allocated in order of priority to the extent available.