Attached files
file | filename |
---|---|
8-K/A - 8-K/A - S&W Seed Co | body8ka.htm |
EX-99.1 - AUDITED FINANCIAL STATEMENTS OF IMPERIAL VALLEY SEEDS, INC. - S&W Seed Co | exh99-1.htm |
EX-23.1 - CONSENT - S&W Seed Co | exh23-1.htm |
EXHIBIT 99.2
S&W Seed Company
Unaudited Pro Forma Combined Financial Statements
The following unaudited pro forma combined financial information is provided for informational purposes only. The unaudited pro forma combined financial information was based on and should be read in conjunction with the (i) historical consolidated financial statements of S&W Seed Company (S&W) included in its Annual Report on Form 10-K for the year ended June 30, 2012; (ii) the historical consolidated financial statements of S&W for the three months ended September 30, 2012 included in its Form 10-Q; (iii) the audited financial statements of Imperial Valley Seeds ("IVS") as of and for the years ended December 31, 2011 and 2010, respectively, which are included in Exhibit 99.2 to this Current Report Form 8-KA; and (iv) the unaudited interim financial statements of IVS for the nine months ended September 30, 2012 which are also included in Exhibit 99.2 to this Current Report Form 8-K/A.
The unaudited pro forma combined consolidated balance sheet as of September 30, 2012, and the unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012, are presented herein. The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on September 30, 2012, and combines the unaudited consolidated balance sheet of S&W Seed Company and the assets acquired from IVS. The unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012 give effect to the acquisition as if it had occurred on July 1, 2011.
S&W's fiscal year ended June 30, 2012 and IVS's fiscal year ended December 31, 2011.The unaudited pro forma combined balance sheet was prepared using the historical balance sheets of S&W and IVS as of September 30, 2012. The unaudited pro forma combined statements of operations were prepared using the historical statements of operations of S&W for the year ended June 30, 2012 and three months ended September 30, 2012, and the historical statements of operations of IVS for the twelve months ended June 30, 2012 and three months ended September, 2012. IVS audited results were adjusted to exclude the six months ended June 30, 2011 and to include the six months ended June 30, 2012 to recast twelve months of operations ending June 30, 2012.
The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition, are factually supportable and are expected to have a continuing impact on the combined results. The unaudited pro forma combined financial information should be read in conjunction with the accompanying notes to the unaudited combined financial statements, and is not necessarily indicative of the combined results of operations or financial condition had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future results of operations or financial position of the combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and information available as of the date of this Current Report on Form 8-K/A. Actual results may differ from the amounts reflected in the unaudited pro forma combined financial statements, and the differences may be material.
S&W SEED COMPANY
Unaudited Pro Forma Combined Balance Sheet
As of September 30, 2012
Historical | Pro Forma | Pro Forma | |||||||||||||
S&W Seed Company | Imperial Valley Seeds | Adjustments | Notes | Combined | |||||||||||
ASSETS | |||||||||||||||
CURRENT ASSETS | |||||||||||||||
Cash and cash equivalents | $ | 8,652,433 | $ | 123,978 | $ | (3,123,978) | a | $ | 5,652,433 | ||||||
Accounts receivable, net | 6,069,461 | 3,320,955 | (3,320,955) | b | 6,069,461 | ||||||||||
Inventories | 8,273,667 | - | - | 8,273,667 | |||||||||||
Prepaid expenses and other current assets | 96,374 | 5,823 | (5,823) | b | 96,374 | ||||||||||
Deferred tax asset | 158,277 | - | - | 158,277 | |||||||||||
TOTAL CURRENT ASSETS | 23,250,212 | 3,450,756 | (6,450,756) | 20,250,212 | |||||||||||
Property, plant and equipment, net of accumulated depreciation | 7,855,043 | - | - | 7,855,043 | |||||||||||
Other intangibles, net | 647,999 | - | 6,182,000 | c | 6,829,999 | ||||||||||
Crop production costs | 1,358,160 | - | - | 1,358,160 | |||||||||||
Deferred tax asset - long term | 464,375 | - | - | 464,375 | |||||||||||
TOTAL ASSETS | $ | 33,575,789 | $ | 3,450,756 | $ | (268,756) | $ | 36,757,789 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||
CURRENT LIABILITIES | |||||||||||||||
Accounts payable | $ | 6,773,250 | $ | 90,187 | $ | (90,187) | b | $ | 6,773,250 | ||||||
Accounts payable - related party | 250,437 | 733,276 | (733,276) | b | 250,437 | ||||||||||
Accrued expenses and other current liabilities | 170,711 | 91,818 | (91,818) | b | 170,711 | ||||||||||
Current portion of long-term debt | 153,776 | - | 150,000 | d | 303,776 | ||||||||||
TOTAL CURRENT LIABILITIES | 7,348,174 | 915,281 | (765,281) | 7,498,174 | |||||||||||
Long-term debt, less current portion | 2,455,010 | - | 600,000 | d | 3,055,010 | ||||||||||
TOTAL LIABILITIES | 9,803,184 | 915,281 | (165,281) | 10,553,184 | |||||||||||
STOCKHOLDERS' EQUITY | |||||||||||||||
Common stock | 7,473 | 10,000 | (9,600) | b, e | 7,873 | ||||||||||
Additional paid-in capital | 23,349,793 | - | 2,431,600 | e | 25,781,393 | ||||||||||
Retained earnings | 415,339 | 2,525,475 | (2,525,475) | b | 415,339 | ||||||||||
TOTAL STOCKHOLDERS' EQUITY | 23,772,605 | 2,535,475 | (103,475) | 26,204,605 | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 33,575,789 | $ | 3,450,756 | $ | (268,756) | $ | 36,757,789 |
See accompanying notes to Unaudited Pro Forma Combined Financial Statements
S&W SEED COMPANY
Unaudited Pro Forma Combined Statement of Operations
For the Three Months Ended September 30, 2012
Historical | Pro Forma | Pro Forma | |||||||||||||
S&W Seed Company | Imperial Valley Seeds | Adjustments | Notes | Combined | |||||||||||
Revenue | |||||||||||||||
Seed and crop revenue | $ | 6,356,052 | $ | 4,513,631 | $ | - | $ | 10,869,683 | |||||||
Milling and other revenue | 363,683 | - | - | 363,683 | |||||||||||
Total revenue | 6,719,735 | 4,513,631 | - | 11,233,366 | |||||||||||
Cost of revenue | |||||||||||||||
Cost of seed and crop revenue | 5,549,419 | 4,005,379 | - | 9,554,798 | |||||||||||
Cost of milling and other revenue | 91,914 | - | - | 91,914 | |||||||||||
Total cost of revenue | 5,641,333 | 4,005,379 | - | 9,646,712 | |||||||||||
Gross profit | 1,078,402 | 508,252 | - | 1,586,654 | |||||||||||
Operating expenses | |||||||||||||||
Selling, general and administrative expenses | 750,351 | 103,242 | (18,608) | g | 834,985 | ||||||||||
Research and development expenses | 103,431 | - | - | 103,431 | |||||||||||
Depreciation and amortization | 69,785 | - | 78,267 | f | 148,052 | ||||||||||
Total operating expenses | 923,567 | 103,242 | 59,659 | 1,086,468 | |||||||||||
Income from operations | 154,835 | 405,010 | (59,659) | 500,186 | |||||||||||
Other expense | |||||||||||||||
Interest expense, net | 7,868 | - | 2,250 | h | 10,118 | ||||||||||
Net income before income tax expense | 146,967 | 405,010 | (61,909) | 490,068 | |||||||||||
Income tax expense | 58,211 | 6,075 | 129,781 | i | 194,067 | ||||||||||
Net income | $ | 88,756 | $ | 398,935 | $ | (191,690) | $ | 296,001 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 0.01 | $ | 0.04 | |||||||||||
Diluted | $ | 0.01 | $ | 0.04 | |||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 6,839,560 | 400,000 | j | 7,239,560 | |||||||||||
Diluted | 6,950,155 | 400,000 | j | 7,350,155 |
See accompanying notes to Unaudited Pro Forma Combined Financial Statements
S&W SEED COMPANY
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended June 30, 2012
Historical | Pro Forma | Pro Forma | |||||||||||||
S&W Seed Company | Imperial Valley Seeds | Adjustments | Notes | Combined | |||||||||||
Revenue | |||||||||||||||
Seed and crop revenue | $ | 13,261,853 | $ | 15,817,579 | $ | - | $ | 29,079,432 | |||||||
Milling and other revenue | 885,764 | - | - | 885,764 | |||||||||||
Total revenue | 14,147,617 | 15,817,579 | - | 29,965,196 | |||||||||||
Cost of revenue | |||||||||||||||
Cost of seed and crop revenue | 9,912,781 | 13,738,035 | - | 23,650,816 | |||||||||||
Cost of milling and other revenue | 327,133 | - | - | 327,133 | |||||||||||
Total cost of revenue | 10,239,914 | 13,738,035 | - | 23,977,949 | |||||||||||
Gross profit | 3,907,703 | 2,079,544 | - | 5,987,247 | |||||||||||
Operating expenses | |||||||||||||||
Selling, general and administrative expenses | 2,772,711 | 358,050 | 14,200 | k | 3,144,961 | ||||||||||
Research and development expenses | 242,523 | - | - | 242,523 | |||||||||||
Depreciation and amortization | 272,855 | - | 313,067 | f | 585,922 | ||||||||||
Total operating expenses | 3,288,089 | 358,050 | 327,267 | 3,973,406 | |||||||||||
Income from operations | 619,614 | 1,721,494 | (327,267) | 2,013,841 | |||||||||||
Other expense | |||||||||||||||
Loss on disposal of fixed assets | 24,532 | - | 24,532 | ||||||||||||
Interest expense, net | 20,937 | - | 11,250 | h | 32,187 | ||||||||||
Net income before income tax expense | 574,145 | 1,721,494 | (338,517) | 1,957,122 | |||||||||||
Income tax expense | 199,310 | 28,216 | 451,874 | l | 679,400 | ||||||||||
Net income | $ | 374,835 | $ | 1,693,278 | $ | (790,390) | $ | 1,277,722 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 0.06 | $ | 0.20 | |||||||||||
Diluted | $ | 0.06 | $ | 0.20 | |||||||||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 5,904,110 | 400,000 | j | 6,304,110 | |||||||||||
Diluted | 5,906,899 | 400,000 | j | 6,306,899 |
See accompanying notes to Unaudited Pro Forma Combined Financial Statements
S&W Seed Company
Notes to Unaudited Pro Forma Combined Financial Statements
Note 1 - Basis of Presentation
The unaudited pro forma combined consolidated balance sheet as of September 30, 2012, and the unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012, are presented herein. The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on September 30, 2012, and combines the unaudited consolidated balance sheet of S&W Seed Company ("the Company or S&W") and the assets acquired from IVS. The unaudited pro forma combined statements of operations for the year ended June 30, 2012 and three months ended September 30, 2012 give effect to the acquisition as if it had occurred on July 1, 2011.
S&W's fiscal year ended June 30, 2012 and IVS's fiscal year ended December 31, 2011.The unaudited pro forma combined balance sheet was prepared using the historical balance sheets of S&W and IVS as of September 30, 2012. The unaudited pro forma combined statements of operations were prepared using the historical statements of operations of S&W for the year ended June 30, 2012 and three months ended September 30, 2012, and the historical statements of operations of IVS for the twelve months ended June 30, 2012 and three months ended September, 2012. IVS audited results were adjusted to exclude the six months ended June 30, 2011 and to include the six months ended June 30, 2012 to recast twelve months of operations ending June 30, 2012.
The unaudited pro forma combined financial information should be read in conjunction with the accompanying notes to the unaudited combined financial statements, and is not necessarily indicative of the combined results of operations or financial condition had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not reflect any cost savings or integration costs. The unaudited pro forma combined financial information does not purport to project the future results of operations or financial position of the combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and information available as of the date of this Current Report on Form 8-K/A. Certain valuations are currently in process. Actual results may differ from the amounts reflected in the unaudited pro forma combined financial statements, and the differences may be material.
Note 2 - Transaction and Purchase Consideration
On October 1, 2012, the Company purchased substantially all of the assets of Imperial Valley Seeds, Inc. ("IVS"). Pursuant to the acquisition agreement, the Company purchased substantially all of the assets of IVS not including cash on hand, all accounts and other receivables of IVS, and all inventory of the IVS alfalfa seed business. The Company did not assume any IVS liabilities.
Pursuant to the acquisition agreement, the Company paid the following consideration: cash in the amount of $3,000,000, a five-year unsecured, subordinated promissory note in the principal amount of $500,000, 400,000 shares of the Company's unregistered common stock valued at $2,432,000 and $250,000 to be paid over a five-year period for a non-competition agreement, for total consideration of $6,182,000. The non-compete portion of the consideration will be paid in five annual installments of $50,000 to Mr. Fabre, who joined the Company as Vice President of Sales and Marketing.
The acquisition has been accounted for as a business combination and the Company valued all assets and liabilities acquired at their estimated fair values on the date of acquisition. Accordingly, the assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition.
The estimated purchase price allocation is based on preliminary estimates of fair value as follows:
Technology/IP | $ | 1,058,000 | |
Customer relationships | 1,467,000 | ||
Trade-name and brands | 1,859,000 | ||
Non-compete | 293,000 | ||
Goodwill | 1,505,000 | ||
Total acquisition cost allocated | $ | 6,182,000 |
The purchase price consists of the following:
Cash | $ | 3,000,000 | |
Unsecured 5 year promissory note | 500,000 | ||
Non-compete payment obligation | 250,000 | ||
Common stock | 2,432,000 | ||
$ | 6,182,000 |
Note 3 - Pro Forma Adjustments
- Represents the cash paid at closing of the acquisition net of the cash balances not acquired.
- Represents elimination of the assets, liabilities and equity that were not acquired in the transaction.
- To reflect the estimated fair value of identifiable intangible assets and goodwill acquired in the acquisition.
- To reflect the $500,000 unsecured promissory note and the $250,000 non-compete obligation recorded at closing. Of the total $750,000 of obligations, $150,000 is classified as current on the combined balance sheet and the remaining balances are classified as long-term.
- To reflect the common stock issued as consideration in the acquisition net of IVS.
- Represents the amortization expense related to the fair value of identifiable amortizable intangible assets acquired in the transaction, as if the acquisition had been completed on July 1, 2011.
- To eliminate $22,158 of transaction expenses, partially offset by an increase in wages and benefits by $3,550.
- The consideration paid included a $500,000 unsecured promissory note. Interest expense is calculated based on 1-month LIBOR plus 2% and assumes the promissory note was issued on July 1, 2011.
- To reflect the additional income tax expense for the three months ended September 30, 2012 assuming a combined Company's effective tax rate of 39.6%.
- To reflect the issuance of 400,000 shares of common stock on the date of acquisition.
- To reflect an increase in wages and benefits by $14,200.
- To reflect the additional income tax expense for the year ended June 30, 2012 assuming a combined Company's effective tax rate of 34.7%.