S&W Seed Co - FORM 10-Q

Attached files

file	filename
EX-32.2 - EX-32.2 - S&W Seed Co	sanw-ex322_11.htm
EX-32.1 - EX-32.1 - S&W Seed Co	sanw-ex321_7.htm
EX-31.2 - EX-31.2 - S&W Seed Co	sanw-ex312_9.htm
EX-31.1 - EX-31.1 - S&W Seed Co	sanw-ex311_6.htm
EX-10.2 - EX-10.2 - S&W Seed Co	sanw-ex102_314.htm
EX-10.1 - EX-10.1 - S&W Seed Co	sanw-ex101_292.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period year ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number: 001-34719

S&W SEED COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Nevada		27-1275784
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)


2101 Ken Pratt Blvd, Suite 201, Longmont, CO		80501
(Address of Principal Executive Offices)		(Zip Code)

(720) 506-9191

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	SANW	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

The number of shares outstanding of common stock of the registrant as of May 12, 2021 was 36,727,027.

S&W SEED COMPANY

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements (Unaudited):	4
	Consolidated Balance Sheets at March 31, 2021 and June 30, 2020	4
	Consolidated Statements of Operations for the Three Months and Nine Months Ended March 31, 2021 and 2020	5
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Nine Months Ended December 31, 2021 and 2020	6
	Consolidated Statements of Stockholders’ Equity for the Three Months and Nine Months Ended March 31, 2021 and 2020	7
	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2021 and 2020	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to: statements concerning the effects of the COVID-19 pandemic on our business; any statements concerning projections of revenue, margins, expenses, tax provisions, earnings, cash flows and other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding our ability to raise capital in the future; any statements concerning expected development, performance or market acceptance relating to our products or services or our ability to expand our grower or customer bases or to diversify our product offerings; any statements regarding future economic conditions or performance; any statements of expectation or belief; any statements regarding our ability to retain key employees; and any statements of assumptions underlying any of the foregoing. These forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “designed,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We have based these forward-looking statements on our current expectations about future events. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Risks, uncertainties and assumptions include the following:

•	the duration of the COVID-19 pandemic and the extent to which it continues to disrupt the local and global economies, as well as our business and the businesses of our customers, distributors and suppliers;

•	changes in demand for our seed products and stevia development program;

•	our plans for expansion of our business (including by expanding crop offerings and market share of existing offerings through strategic transactions) and our ability to successfully integrate acquisitions into our operations;

•	whether we continue to invest in research and development and whether such investment results in trait improvement across our crop categories;

•	the continued ability of our distributors and suppliers to have access to sufficient liquidity to fund their operations;

•	market trends and other factors affecting our financial condition or results of operations from period to period;

•	the impact of crop disease, severe weather conditions, such as flooding, or natural disasters, such as earthquakes, on crop quality and yields and on our ability to grow, procure or export our products;

•	the impact of pricing of other crops that may be influence what crops our growers elect to plant;

•	whether we are successful in aligning expense levels to revenue changes;

•	whether we are successful in monetizing our stevia business;

•	the cost and other implications of pending or future legislation or court decisions and pending or future accounting pronouncements; and

•

other risks that are described herein and in the section titled “Risk Factors” contained in Part I, Item A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, or the Annual Report, and that are otherwise described or updated from time to time in our filings with the Securities Exchange Commission.

You are urged to carefully review the disclosures made concerning risks and uncertainties that may affect our business or operating results, which include, among others, those described above.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Many factors discussed in this Quarterly Report on Form 10-Q, some of which are beyond our control, will be important in determining our future performance. Consequently, these statements are inherently uncertain and actual results may differ materially from those that might be anticipated from the forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this Quarterly Report on Form 10-Q as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Furthermore, such forward-looking statements represent our views as of, and speak only as of, the date of this Quarterly Report on Form 10-Q, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. We undertake no obligation to publicly update any forward-looking statements, or to update the reasons why actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

When used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “the Company,” “S&W” and “S&W Seed” refer to S&W Seed Company and its subsidiaries or, as the context may require, S&W Seed Company only. Our fiscal year ends on June 30,

and accordingly, the terms “fiscal 2021,” “fiscal 2020,” and “fiscal 2019” in this Quarterly Report on Form 10-Q refer to the respective fiscal year ended June 30, 2021, 2020 and 2019, respectively, with corresponding meanings to any fiscal year reference beyond such dates. Trademarks, service marks and trade names of other companies appearing in this report are the property of their respective holders.

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

S&W SEED COMPANY

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

ASSETS	March 31, 2021			June 30, 2020
CURRENT ASSETS
Cash and cash equivalents	$	3,364,511		$	4,123,094
Accounts receivable, net		24,012,608			19,023,098
Inventories, net		65,989,304			63,882,938
Prepaid expenses and other current assets		1,204,298			1,374,677
TOTAL CURRENT ASSETS		94,570,721			88,403,807
Property, plant and equipment, net		18,140,972			20,494,312
Intangibles, net		37,864,866			38,784,058
Goodwill		1,677,186			1,508,675
Other assets		6,287,105			6,764,781
TOTAL ASSETS	$	158,540,850		$	155,955,633
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	22,583,749		$	8,045,694
Deferred revenue		1,750,120			6,171,904
Accrued expenses and other current liabilities		8,017,590			9,618,892
Lines of credit, net		34,977,975			26,983,264
Current portion of long-term debt, net		1,546,453			1,780,522
TOTAL CURRENT LIABILITIES		68,875,887			52,600,276
Long-term debt, net, less current portion		11,587,981			14,328,823
Contingent consideration obligation		4,509,011			4,263,503
Other non-current liabilities		2,736,395			3,427,054
TOTAL LIABILITIES		87,709,274			74,619,656
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value; 75,000,000 shares authorized; 35,291,280 issued and 35,266,280 outstanding at March 31, 2021; 33,457,861 issued and 33,432,861 outstanding at June 30, 2020;		35,291			33,458
Treasury stock, at cost, 25,000 shares		(134,196	)		(134,196	)
Additional paid-in capital		144,162,671			137,809,540
Accumulated deficit		(67,627,446	)		(50,140,942	)
Accumulated other comprehensive loss		(5,540,583	)		(6,111,424	)
Noncontrolling interests		(64,161	)		(120,459	)
TOTAL STOCKHOLDERS' EQUITY		70,831,576			81,335,977
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	158,540,850		$	155,955,633

See notes to consolidated financial statements.

S&W SEED COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2021			2020			2021			2020

Revenue	$	32,376,697		$	29,091,884		$	61,283,414		$	53,717,442
Cost of revenue		26,206,066			22,667,126			51,293,692			42,027,439
Gross profit		6,170,631			6,424,758			9,989,722			11,690,003
Operating expenses
Selling, general and administrative expenses		5,797,322			5,895,984			16,402,352			15,663,907
Research and development expenses		2,357,905			2,041,650			6,483,894			5,301,714
Depreciation and amortization		1,336,798			1,209,433			4,126,776			3,620,235
Gain on disposal of property, plant and equipment		(1,311,346	)		(7,719	)		(1,353,415	)		(20,794	)
Total operating expenses		8,180,679			9,139,348			25,659,607			24,565,062
Loss from operations		(2,010,048	)		(2,714,590	)		(15,669,885	)		(12,875,059	)
Other expense
Foreign currency loss (gain)		87,849			81,574			(16,704	)		67,399
Change in estimated value of assets held for sale		—			—			—			92,931
Change in contingent consideration obligation		(683,611	)		—			(248,092	)		—
Loss on extinguishment of debt		—			—			—			140,638
Interest expense - amortization of debt discount		133,941			96,222			501,601			393,935
Interest expense		558,494			444,401			1,736,836			1,382,680
Loss before income taxes		(2,106,721	)		(3,336,787	)		(17,643,526	)		(14,952,642	)
Provision for income taxes		(257,633	)		(7,296	)		(213,320	)		17,224
Net loss	$	(1,849,088	)	$	(3,329,491	)	$	(17,430,206	)	$	(14,969,866	)
Net income (loss) attributed to noncontrolling interests		(1,796	)		(47,742	)		56,298			(97,770	)
Net loss attributable to S&W Seed Company	$	(1,847,292	)	$	(3,281,749	)	$	(17,486,504	)	$	(14,872,096	)

Net loss attributable to S&W Seed Company per common share:
Basic	$	(0.05	)	$	(0.10	)	$	(0.51	)	$	(0.45	)
Diluted	$	(0.05	)	$	(0.10	)	$	(0.51	)	$	(0.45	)
Weighted average number of common shares outstanding:
Basic		34,945,476			33,385,376			33,976,517			33,323,239
Diluted		34,945,476			33,385,376			33,976,517			33,323,239

See notes to consolidated financial statements.

S&W SEED COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2021			2020			2021			2020
Net loss	$	(1,849,088	)	$	(3,329,491	)	$	(17,430,206	)	$	(14,969,866	)
Foreign currency translation adjustment, net of income taxes		36,875			(486,500	)		570,841			(540,995	)
Comprehensive loss	$	(1,812,213	)	$	(3,815,991	)	$	(16,859,365	)	$	(15,510,861	)
Comprehensive income (loss) attributable to noncontrolling interests		(1,796	)		(47,742	)		56,298			(97,770	)
Comprehensive loss attributable to S&W Seed Company	$	(1,810,417	)	$	(3,768,249	)	$	(16,915,663	)	$	(15,413,091	)

See notes to consolidated financial statements.

S&W SEED COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Preferred Stock				Common Stock				Treasury Stock						Additional Paid-In			Accumulated			Noncontrolling			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Interests			Loss			Equity
Balance, December 31, 2019		—		—		33,329,566	$	33,329		(25,000	)	$	(134,196	)	$	137,204,276		$	(42,056,965	)		(97,713	)	$	(6,192,962	)	$	88,755,769
Stock-based compensation - options, restricted stock, and RSUs		—		—		—		—		—			—			325,587			—			—			—			325,587
Net issuance to settle RSUs		—		—		93,453		94		—			—			(49,396	)		—			—			—			(49,302	)
Other comprehensive loss		—		—		—		—		—			—			—			—			—			(486,500	)		(486,500	)
Net loss		—		—		—		—		—			—			—			(3,281,749	)		(47,742	)		—			(3,329,491	)
Balance, March 31, 2020		—	$	—		33,423,019	$	33,423		(25,000	)	$	(134,196	)	$	137,480,467		$	(45,338,714	)	$	(145,455	)	$	(6,679,462	)	$	85,216,063

Balance, December 31, 2020		—	$	—		34,189,660	$	34,190		(25,000	)	$	(134,196	)	$	140,028,674		$	(65,780,154	)	$	(62,365	)	$	(5,577,458	)	$	68,508,691
Stock-based compensation - options, restricted stock, and RSUs		—		—		—		—		—			—			421,814			—			—			—			421,814
Net issuance to settle RSUs		—		—		20,718		21		—			—			(28,727	)		—			—			—			(28,706	)
Proceeds from sale of common stock, net of fees and expenses		—		—		1,080,902		1,081		—			—			3,740,910			—			—			—			3,741,990
Other comprehensive income		—		—		—		—		—			—			—			—			—			36,875			36,875
Net loss		—		—		—		—		—			—			—			(1,847,292	)		(1,796	)		—			(1,849,088	)
Balance, March 31, 2021		—	$	—		35,291,280	$	35,291		(25,000	)	$	(134,196	)	$	144,162,671		$	(67,627,446	)	$	(64,161	)	$	(5,540,583	)	$	70,831,576

	Preferred Stock				Common Stock				Treasury Stock						Additional Paid-In			Accumulated			Noncontrolling			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Interests			Loss			Equity
Balance, June 30, 2019		—		—		33,303,218	$	33,303		(25,000	)	$	(134,196	)	$	136,751,875		$	(30,466,618	)		(47,685	)	$	(6,138,467	)	$	99,998,212
Stock-based compensation - options, restricted stock, and RSUs		—		—		—		—		—			—			794,191			—			—			—			794,191
Net issuance to settle RSUs		—		—		119,801		120		—			—			(65,599	)		—			—			—			(65,479	)
Other comprehensive loss		—		—		—		—		—			—			—			—			—			(540,995	)		(540,995	)
Net loss		—		—		—		—		—			—			—			(14,872,096	)		(97,770	)		—			(14,969,866	)
Balance, March 31, 2020		—	$	—		33,423,019	$	33,423		(25,000	)	$	(134,196	)	$	137,480,467		$	(45,338,714	)	$	(145,455	)	$	(6,679,462	)	$	85,216,063

Balance, June 30, 2020		—	$	—		33,457,861	$	33,458		(25,000	)	$	(134,196	)	$	137,809,540		$	(50,140,942	)	$	(120,459	)	$	(6,111,424	)	$	81,335,977
Stock-based compensation - options, restricted stock, and RSUs		—		—		—	$	—		—			—			1,303,439			—			—			—		$	1,303,439
Net issuance to settle RSUs		—		—		253,199	$	253	$	—		$	—		$	(76,645	)		—			—			—		$	(76,392	)
Proceeds from sale of common stock, net of fees and expenses		—		—		1,580,220	$	1,580		—			—			5,126,337			—			—			—		$	5,127,917
Other comprehensive income		—		—		—		—		—			—			—			—			—			570,841		$	570,841
Net income (loss)		—		—		—

S&W Seed Co - FORM 10-Q - May 13, 2021

Attached files